Facts You Need to Know and Myths You Need to Unlearn

As with many seemingly complex legal actions, bankruptcy is surrounded by numerous myths, misconceptions, and misinformation. Often perpetuated by word of mouth, these myths can spell disaster for people who wish to explore bankruptcy as a form of much-needed debt relief. Knowing that our clients depend on facts to aid them in their early decision-making process, our DFW bankruptcy attorneys have made the effort to compile and debunk some of the most common bankruptcy myths and misconceptions we hear from our clients.

Bankruptcy is a sign of failure. 
Absolutely false. Although this myth may stem from a strong social stigma surrounding bankruptcy, it has become clear in recent years that harsh economic times have affected the lives of people from all walks of life. Misfortune, bad luck, and a tremendously uncertain and unstable economic climate can all contribute to financial problems. Unforeseen injuries and illness, job loss, and underwater mortgages are all events that can lead a person toward bankruptcy, and they are certainly not signs of failure. In fact, you may be surprised to know that some of the most financially powerful and successful people have filed bankruptcy, including Walt Disney, Henry Ford, Willie Nelson, and Donald Trump, among others. Bankruptcy does not necessarily signify failure; instead, it shows that an individual has the responsibility to seek the help they need.

Filing bankruptcy means that you will lose everything. 
Untrue. While "going bankrupt" may have held a different meaning long ago, no one today loses everything when filing bankruptcy. U.S. bankruptcy law was created as a way to help people in need, not to punish them, leave them in the red, and strand them with nothing but the shirts on their backs. In fact, bankruptcy can be a powerful tool consumers can use to protect their property, including their homes. There are also state and federal bankruptcy exemptions in place that allow consumers to protect personal property and assets. Losing everything may be true in board games, but it is certainly not the case when filing bankruptcy in the United States.

All debts will be discharged when you file bankruptcy. 
This myth, while false, exaggerates the truth. In many cases, a debt discharge is the consumer's ultimate goal. A discharge granted by the court will release a consumer from all legal obligations associated with paying a debt. Discharges, however, are typically limited to unsecured debts, including medical bills, payday and personal loans, and credit card debts. There are various types of debts that cannot be discharged. Some of the debts that are usually not eligible for a discharge during bankruptcy include child support and alimony, debts owed to government agencies, and student loans, among others.

When you know that you'll be filing bankruptcy, you can charge as much as you want. 
Entirely false. Do not believe or act upon this myth! Charging as much as you want on a credit card prior to filing can negatively impact your eligibility to complete the case and / or gain a discharge. It may also subject you to criminal consequences and allegations, including fraud. Do not do this.

Filing bankruptcy will permanently ruin your credit. 
This is an extremely common myth that takes a half-truth and completely stretches it out of proportion. While it is true that bankruptcy, foreclosure, and other types of debt relief actions will have an impact on credit, the effects are in no way ruinous and are definitely not permanent. Generally, Chapter 7 bankruptcy can remain on a credit report, thus affecting your credit score, for up to 10 years and Chapter 13 for up to 7 years. Exceptions do apply, and creditors and lenders tend to view a bankruptcy differently based on their unique company policies. In fact, many consumers find that in their life after bankruptcy, they can successfully rebuild and restore credit to a much higher score than before they began bankruptcy proceedings. The most important thing to do is to practice responsible credit behavior that reflects your newfound financial responsibility. Creditors and lenders will consider such improvements when making the decision to give you credit and / or loans.

Contact a DFW Bankruptcy Lawyer to Learn More About Your Unique Situation

Our bankruptcy attorneys have chosen to debunk these common myths and misconceptions because we know that can have a negative impact on consumers and their perception of bankruptcy. Although cases are always unique, bankruptcy can be a viable, healthy tool for achieving a financial fresh start and new economic opportunities. If you live in North Texas such as throughout the DFW or surrounding communities, call us to learn more about your unique situation and how our firm can help. With 85 years of combined experience and a focus on walking clients through their legal journey step by step, you can rest assured that the help you need is within reach. Contact our firm today.