Do You Believe These Bankruptcy Myths?

Understandably, you may hesitate to file for bankruptcy in Maryland. Does your belief in bankruptcy falsehoods stand in the way of financial relief?

The American Bankruptcy Institute investigates common bankruptcy myths that you may believe. Separate fact from fiction to figure out your next move.

“Bankruptcy ruins your credit for the rest of your life.”

True, filing for bankruptcy initially hurts your credit score, but do not anticipate permanent damage. In actuality, credit card companies may send you offers for secured credit cards with low limits weeks after you discharge your debt. Six to eight months after filing, you could see your credit score inch upward.

“Married couples must file for bankruptcy together.”

You may worry about harming your spouse’s credit if you file for bankruptcy. If you have a lot of debt in your name and your name only, you may file by yourself without worrying about your partner’s financial health. If you both have massive shared debt in both your names, both file for bankruptcy together.

“Bankruptcy wipes out all your debt.”

Do you owe back child support, alimony or student loans? If so, filing for Chapter 7 bankruptcy does not wipe your financial slate clean. Instead, Chapter 7 only dissolves unpaid utility bills, personal loans, health care bills and other unsecured debts.

“You may make massive purchases before filing bankruptcy and wipe them away after filing.”

Do not go on a spending frenzy before declaring bankruptcy, hoping to wipe out that recent debt along with everything else. The court may accuse you of fraud by going on a pre-filing spending spree. Any fraudulent debt you incur does not qualify for a discharge.

Bankruptcy may not be as beneficial or detrimental as you think. Investigate your assumptions to determine if they line up with reality.