Each year, millions of Americans find themselves overwhelmed with debt for a variety of reasons. After all the associated fear, realizing that no amount of “cutting back” is going to get them out of their financial hole, people begin to consider bankruptcy options.
Bankruptcy is one big, scary word for those in financial trouble. Along with the dreaded “B word” comes the perceived social stigma, a fear of irreparable credit damage and countless other worries about the effect bankruptcy will have on your future. As with most things, the more you know about it, bankruptcy isn’t as terrifying as you may think. It’s not the end of your financial world and, in fact, done correctly, filing for bankruptcy can actually help you reclaim your financial freedom, peace of mind and hope for the future. As the old saying goes, “knowledge is power”.
Dispelling the myths about bankruptcy and having a clear understanding of bankruptcy options is key to helping those who are hurting financially. While bankruptcy may not be the right step for everyone, understanding it can help individuals make informed financial decisions.
Myth 1: Everyone Will Know You Have Filed for Bankruptcy. False. Unless you’re a celebrity or a major corporation covered by the media, you, your attorney and creditors are probably the only ones who will ever know. While it’s true that your bankruptcy is a matter of public record, millions of people file each year, so unless someone is specifically trying to track down information on you, there is almost no likelihood that anyone will even know you filed. Bankruptcies are also not part of any published papers.
Myth 2: People who file for bankruptcy are irresponsible. False. More than 90% of bankruptcy filings are traceable to very serious personal problems to one of three areas: loss of job, divorce, or serious illness. These three life events have driven many well-intentioned Americans into bankruptcy. In fact, a recent study by the Centers for Disease Control and Prevention found that as many as 20 percent of American families have problems paying their medical bills.
Myth 3: People who file bankruptcy will never own anything again. False. Maybe you’re heard of the gentlemen below.
1. In his casino business, Donal Trump has filed bankruptcy four times between 1991 and 2010. The filings allowed him to reorganize the organizations into profitable casinos that have expanded each year since.
2. Walt Disney filed bankruptcy when his original company’s financial backers left him. Scraping together the money to get to Hollywood by bus, he started his own company in a ramshackle office and worked hard. Walt Disney Co is now valued at over $80 Billion.
3. In 1901, there was this perfectionist automobile enthusiast named Henry that had to file bankruptcy. It seemed he just couldn’t figure out how to efficiently assemble and market his designs. After spending two years rethinking and planning, in 1903 Henry came back and relaunched his very successful Ford Motor Company.
You may not end up being worth $80 billion, but you CAN own anything you want after bankruptcy.
Myth 4. Bankruptcy permanently ruins your credit. False. Filing bankruptcy gets rid of debt, which puts you in a position to handle more credit, and this makes you look more attractive to would-be lenders. This may not be credit at the best rates, but credit is available. At first, lenders will want more money down and will charge you higher interest rates. However, over time, if you are careful, and keep your job, and start saving money, pay your bills on time and do things that will put good marks on your credit report, your credit scores will get higher, and the lending terms you can get will improve.
Myth 5: You lose everything you own in bankruptcy. False. In most bankruptcy cases filed by individuals, you will be able to keep almost everything you own. There are exemptions that provide for assets that you can keep and some assets, like pensions, are beyond the reach of bankruptcy trustees and creditors. Furthermore, a chapter 13 reorganization is specifically designed to enable you to keep your assets while paying as much debt as you can reasonably afford.
Myth 6: It’s really hard to file for bankruptcy and I can’t afford an attorney. False. In the hands of an experienced bankruptcy attorney, a bankruptcy case generally goes very smoothly. They handle all the technical details, leaving you free to concentrate on your family and loved ones, and on rebuilding your financial future
Remember, if you’re having financial problems, you’re not alone. Many hard working Americans are in the same boat as you. Rather than let your debts rule your life, talk to an attorney at Miller & Miller Law about how you can get out from under your financial burden and on the road to financial freedom.