3 major bankruptcy myths

On Behalf of | Aug 4, 2021 | Bankruptcy

It’s important to recognize myths in many areas of the law, bankruptcy included. People often don’t even realize that the information they’re spreading is inaccurate. They honestly believe that it’s true, but they have been misled at some point, and they wind up repeating it.

To avoid serious mistakes, you need to know what is a myth and what is really based in fact. Let’s start with three of the most common myths.

You’re irresponsible and the bankruptcy filing is your fault

This is a particularly detrimental myth because it actually keeps some people from filing. Financially, bankruptcy would be the most helpful thing in the world, but they avoid it because they think they caused this problem themselves. The truth is that bankruptcy is often due to things like medical bills or job loss, over which you have very little control — or none at all.

Your credit score is never going to recover

While a drop in score is inevitable, don’t believe that it will never recover. That recovery starts as soon as you file. Remember, missing payments and accumulating more debt hurts your score. Filing for bankruptcy stops that process. You can also use secured credit cards and other financial options to increase your score once again. You will still be able to get loans and live the life you want to lead.

Once you decide to file, you can spend as much as you want

There are cases where people have maxed out as many cards as they could, thinking that bankruptcy would clear it all away. This can actually constitute fraud. A massive increase in spending is a red flag, and it could lead to the denial of your case. It’s actually important to be careful about how you spend right before you declare bankruptcy, though there are still purchases you can make without penalty.

Getting the process started

These are not all the myths that exist about bankruptcy, but they do help to show you how some common information may not be as accurate as you thought. Be sure you know exactly how to get this legal process started and what you can believe.