In one year during this decade, one tech provider estimated that as many as 1.25 million Americans filed bankruptcy petitions. That number was actually a decrease from the 1.38 million the prior year.
Despite the popularity of the strategy to get out of the deepest debts, some myths still center around consumer bankruptcies. Let’s wipe out these misguided notions once and for all.
— Only financially irresponsible people file for bankruptcy. There are many reasons why consumers may need to file for Chapter 7 or 13, including medical bills after a serious illness or accident and financial hardships due to divorce or termination from employment.
— You can run up the plastic right before filing for bankruptcy without penalty. The court considers this to be a fraudulent action, and fraudulently incurred debts are non-dischargeable in a bankruptcy.
— All your debts get wiped out in a bankruptcy discharge. Child and spousal support don’t go away with bankruptcy. Neither does criminal restitution and most student loans and tax debts.
— Forget about getting credit after filing for bankruptcy. There’s a whole branch of the credit card industry focused on offering credit to those coming out of bankruptcy discharges.
— Bankruptcy is for everyone. It’s not. It’s the nuclear option when other options have failed to get you out of debt. Remember, too, that the same bad spending habits and patterns that landed you in financial hot water this time can do it again.
Take advantage of what you learn in the mandatory credit counseling session and apply the financial techniques to your life post-bankruptcy to keep your fiscal futures sunny.
Source: U.S. News & World Report, “5 Bankruptcy Myths Debunked,” Susan Johnston Taylor, accessed Feb. 10, 2017