Dispelling Myths About Bankruptcy

The thought of filing for bankruptcy sends many people into a panic. They may be struggling to pay their bills, falling further behind all the time, living under the constant strain of debt and fending off harassing creditors.

However, they think that filing for bankruptcy would be even worse because they believe some of the common myths surrounding bankruptcy. People in Ohio and across the U.S. who are having financial difficulties should have the facts about filing for bankruptcy.

Myth #1: Filing For Bankruptcy Means Losing Everything

One of the most common misconceptions that prevents people from seeking bankruptcy relief is the belief that if they file bankruptcy, everything they have worked so hard to acquire in their lives will be gone. In fact, bankruptcy law allows for several exemptions people can take to protect certain things from their creditors and to be able to continue to meet their basic needs.

Exemptions can differ based on whether a person files under state or federal bankruptcy, but both allow exemptions for homesteads, pensions, retirement accounts, vehicles and other personal property.

Myth #2: Filing For Bankruptcy Means Never Getting Credit Again

Many people avoid filing for bankruptcy because they fear it will do irreparable damage to their credit scores and they will never be able to obtain credit again. While it is true that filing bankruptcy hurts a person's credit score, several lenders rush to offer a person credit after filing bankruptcy because the filer now has very little or no other debts, so creditors believe the person will be able to repay the money. Creditors also know that it will be some time before a person can file bankruptcy again, so there is less of a chance that the creditor will lose money through a bankruptcy debt discharge.

However, people should understand that the interest rates that these lenders offer will most likely be very high. They are not the most desirable credit options, but they do exist if people have immediate need for credit right after filing bankruptcy. Rates will improve as time passes if people take steps to repair their credit scores after bankruptcy.

Myth #3: A Person Can Only File Bankruptcy Once

Some people believe that they may only file for bankruptcy once in their lives, so they need to save that option in case things get even worse later. However, a person may file for Chapter 7 bankruptcy once every eight years, and he or she may file for Chapter 13 bankruptcy more frequently than that.

It is not a good idea to file bankruptcy frequently, but the option does exist if people hit another crisis in their lives and need bankruptcy relief. For more information, contact a knowledgeable bankruptcy attorney in your area.