The decision to file for bankruptcy isn't an easy one -- and it shouldn't be. However, it's one that should be made knowing all of the options and understanding them. There are a lot of myths that still exist around what personal bankruptcy can and cannot accomplish. We're going to discuss some prominent ones and give you the facts.
Myth: Bankruptcy is an admission of personal failure. Truth: The circumstances that lead people to a place where they consider bankruptcy are varied, and often are out of their control. Medical debt, for example, even by people who have health insurance, is a cause of many bankruptcies.
Myth: Bankruptcy will harm your financial future. Truth: Although it will impact your ability to get credit and the interest rates you pay while the bankruptcy is on your credit report (seven to 10 years), it's likely to improve your credit score within months. Further, credit can always be rebuilt.
Myth: You'll lose all of your property and assets. Truth: If you file for Chapter 13, you don't have to give up any of your assets. Even if you file for Chapter 7, there are exemptions from it. These vary by state, so work with your Pennsylvania bankruptcy attorney to determine what exemptions, such as your home, you can include.
Myth: It's always better to pay off your debts than file for bankruptcy. Truth: That's not always true. If your debt totals more than half of your annual income and you don't see how you can eliminate it within the next five years, bankruptcy may be the best option.
Myth: Bankruptcy relieves all of your debt. Truth: While personal bankruptcy will relieve you from most of your debt, there are exceptions. These include child and spousal support, taxes and often student loans.
If you feel overwhelmed by debt, the best option is to consult with an experienced Pennsylvania bankruptcy attorney to determine whether filing for bankruptcy is the best option given your specific circumstances and what it will and won't accomplish. While there are downsides to it, many people find that no longer having the weight of overwhelming debt hanging over them and having a plan for their financial future makes it a wise decision.
Source: Money, "5 Bankruptcy Myths You Shouldn’t Believe," Sean Pyles, NerdWallet, June 13, 2016