Bankruptcy is one of the most misunderstood concepts. Well-intentioned but ill-conceived advice from friends, family members, or information on the internet can unfortunately be counterproductive. For people struggling to gain control of their finances bankruptcy is a tool that can provide tremendous relief and is actually pretty similar to filing your tax returns. This article is the first in a three part series explaining and debunking three of the most common myths surrounding bankruptcy.
Myth # 1 Bankruptcy will destroy my credit
This is a common fear among many would be filers. However, once you have reached the point where you are considering bankruptcy, chances are your credit is already shot. When struggling with debt, your concern should be debt relief; not credit scores. Regardless, bankruptcy is by no means the death of your credit. On the contrary, bankruptcy is the first step to rebuilding your credit.
By way of analogy; if you suffer a serious injury to your knee, while it may still be possible to walk around and go about your daily business, your movements will be severely impeded as you try to cope with the searing pain weighing you down. Daily activities such as getting out of bed in the morning, walking to the bus, or even taking a shower - while not impossible - will suddenly become enormously painful. If you elect to have surgery, in the beginning your knee will likely be in even greater pain.Ultimately though, your knee will heal and become stronger. You will no longer be forced to carry a dead weight with you wherever you go. Daily activities will eventually be pain free and you will be back to leading a healthy and productive lifestyle.
Bankruptcy is analogous. While it is possible to live your daily life being weighed down by crushing debt, many normal parts of everyday life will not be smooth. With a poor credit score, you will have trouble qualifying for a mortgage, obtaining a car loan, or even surviving a credit check by a potential landlord if you are a renter. Many employers frequently run credit checks on potential hires as well.
Filing for bankruptcy is the surgery. It is the first step towards rebuilding and removing the crushing debt from your credit. Once the debt is removed you will be leaner and stronger. You will be able to rebuild your credit and regain control of your life.
Stay tuned for the next article in the series which will address myth # 2 ‘bankruptcy is dishonest.’
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