When it comes to bankruptcy there’s a lot of confusion. It’s often hard to separate fact from fiction. But that doesn’t mean you need to get caught up in bankruptcy myths that, if believed, could ruin your future finances. Let’s take a closer look:
Myth #1 – If you file bankruptcy you’ll never get a job.
This myth is probably one of the biggest reasons some people in financial difficulty don’t file for a bankruptcy they desperately need. The truth is that it’s not bankruptcy that can prevent you from getting a job, but in some cases unpaid debts, garnishments, and creditor lawsuits will. Filing bankruptcy can make you seem more appealing to some employers because it gives you a financial clean slate.
Myth #2 – If you file bankruptcy you won’t be able to buy a home.
This is another falsehood that is far from the truth. Many former bankruptcy filers go on to successfully purchase the home of their dreams. Many lenders give less weight to a bankruptcy after two or more years and will definitely view a bankruptcy more favorably than late payments and defaults.
Myth #3 – Filing for bankruptcy means that you’ll lose all of your possessions.
Simply not true. For the average filer, bankruptcy exemptions protect most of their personal property from liquidation. Family heirlooms, some vehicles, and even real estate are often covered by bankruptcy exemptions and cannot be liquidated to repay creditors.
Myth #4 – You can’t file bankruptcy if you work a “good paying” job.
There are no income limits on who can file bankruptcy, but there are limits on what type of bankruptcy you can file. These limits are determined by how much money you have left to pay creditors after deducting allowable expenses. The truth of the matter is that even millionaires, such as Donald Trump, successfully file bankruptcy, get a clean slate, and go on to succeed financially.
Myth #5 – Filing bankruptcy means that you won’t get any credit for 7 – 10 years.
Within months of exiting bankruptcy, many filers go on to rebuild their credit. You can get a secured credit card within a month or two of exiting bankruptcy and, within a year, if your payments are timely, some creditors are willing to extend small amounts of unsecured credit.
Don’t let bankruptcy myths stop you from getting a fresh financial start.