Many people have reasonable concerns about filing for bankruptcy. Over time, some of these concerns can become exaggerated and turn into myths. Exploring some of the most common bankruptcy myths may help you decide whether bankruptcy is the right option for you. You can also reach out to an experienced Tullahoma bankruptcy attorney to learn more.
Top Bankruptcy Myth
One of the most common debt myths is that bankruptcy will ruin your credit score forever. No wonder people who hear this avoid bankruptcy at all costs. Dealing with a bad credit score for the rest of your life would make anyone avoid this.
However, the reality is that credit scores can be rebuilt over time. Bankruptcy does lower a credit score, but only for a temporary amount of time. On average, bankruptcy is removed from a credit score within about seven to 10 years.
The other myth is that bankruptcy will completely destroy your credit score. However, credit scores usually go down about 130 to 150 points after filing for bankruptcy. If you have a moderately high credit score, this will not completely lower your credit score to zero. You may still have financial options rather than no financial options at all.
Some people will rationalize not filing for bankruptcy because falling behind on debt will damage their credit score less than bankruptcy will. At the same time, missing more and more debt payments can lower a credit score more than bankruptcy if enough time passes. This may eventually lead to repossession and wage garnishment, all of which may impact credit.
Other Bankruptcy Myths
Other common bankruptcy myths include misperceptions about how bankruptcy works. Some people believe that only people who are irresponsible with money file for bankruptcy. This stigma may lead to further financial problems when bankruptcy is the only option left. Not filing for bankruptcy might be just as irresponsible, depending on the situation.
Unforeseen financial disasters and emergencies can make genuine hard-working people fall into bankruptcy. These people did not fall into bankruptcy due to making the wrong decisions. Bankruptcy myths related to the process itself include:
Bankruptcy is fast
Bankruptcy resets finances
Bankruptcy eliminates all debt
The reality is that bankruptcy may not always erase all debt, and the process may take time. You may still be accountable for a portion of debt even after bankruptcy. Bankruptcy may reset your debt but also impacts your credit score.
One of the most common myths related to college is that student loans cannot be discharged with bankruptcy. In some cases, you can file for student loan bankruptcy if you can prove undue hardship in court. When undue hardship is severe enough, even private student loans can be discharged with bankruptcy.
Call Tom Bible Law for Legal Help
Filing for bankruptcy can be an intimidating step to take. You do not have to figure this out alone. Contact us at Tom Bible Law by dialing (423) 424-3116 today for a consultation about bankruptcy. Our dedicated team of Tennessee bankruptcy lawyers can help you explore a variety of bankruptcy options. We can be found in the Tennessee cities of Chattanooga, Kingsport, and Tullahoma.