Dispelling Bankruptcy Myths
Oct. 31, 2022
The word “bankruptcy” is often viewed negatively by people who do not understand how bankruptcies are intended to work. Many people do not understand what bankruptcy does because of the myths and misinformation circulating online.
Bankruptcy is a powerful remedy for those who need to eliminate debts and get financial relief. If you want to step on the path to financial recovery, it is time to dispel the myths and misconceptions that may be holding you back.
As a bankruptcy attorney at the Law Office of Jason Cline, I can educate you on the facts so that you can make informed decisions regarding your financial situation. From my office in Albuquerque, New Mexico, I serve debtors throughout the state, including in Santa Fe, Rio Rancho, and Los Lunas.
Eight Bankruptcy Myths You Should Stop Believing
A lot of the things you think you know about bankruptcy are false. I’m not trying to say that everything you know about bankruptcy is a myth. But, given the abundance of misinformation and misconceptions spread online, it is time for a reality check.
“A bankruptcy will ruin your credit forever.” This is a common misconception about bankruptcies. Discharging debt through bankruptcy does not ruin your credit; it resets it. Although your credit will most likely take a hit after you file for bankruptcy, discharging your debts can give you a much-needed fresh start so you can begin rebuilding your credit.
“Filing for bankruptcy will discharge all debts.” Not true. Although filing for bankruptcy may discharge most types of debt, several debts are not discharged through bankruptcy. Past-due alimony or child support are not dischargeable under any circumstances. The same can be said about criminal fines and restitution. Student loan debts cannot be discharged unless the debtor can prove a hardship.
“You will lose everything when you file for bankruptcy.” This myth alone keeps many people from filing for bankruptcy. Going bankrupt does not mean losing everything. In fact, debtors who file for bankruptcy in New Mexico can use the state’s bankruptcy exemptions to protect their property and assets.
“Both spouses have to file for bankruptcy.” Contrary to popular belief, married individuals can choose between filing individually and jointly with their spouse. Although it often makes sense for both spouses to file together, it is up to you whether you want to file for bankruptcy individually without getting your spouse involved.
“There is a limited number of times you can file for bankruptcy in your lifetime.” There is no limit to how many times you can declare bankruptcy in your lifetime. Instead, the law requires waiting periods between bankruptcies, which means you can file for bankruptcy as many times as you like if you have waited four to eight years after the last discharge (the waiting time varies depending on the chapter of your previous and new bankruptcy).
“You have a spending problem if you file for bankruptcy.” Most people who file for bankruptcy go through tough experiences and financial setbacks, including job loss, medical treatment, divorce, and other unexpected emergencies. The need to file for bankruptcy does not make you a “failure” or indicate that you have a spending problem. Filing for bankruptcy means that you need to get your financial life back on track because of certain circumstances.
“Filing for bankruptcy will not stop creditors from harassing you.” False. In fact, filing for bankruptcy is by far the best way to stop creditor harassment immediately. A bankruptcy filing triggers an automatic stay, which orders creditors to cease debt collection actions and stop communication with the debtor.
“It is impossible to buy property after filing for bankruptcy.” No, buying property after bankruptcy is not impossible. However, it may take some time to rebuild your record and qualify for a mortgage after bankruptcy. Also, keep in mind that you cannot apply for new loans until a judge dismisses or discharges your bankruptcy.
These are some of the most common bankruptcy myths that need to be dispelled once and for all. If you want to learn more, speak with a knowledgeable bankruptcy attorney.
The Law Office of Jason Cline Can Help
Bankruptcy myths may be holding you back from a much-needed fresh start. If you want to learn more about bankruptcy, I can answer your questions and address your concerns during a free, no-obligation consultation. At the Law Office of Jason Cline, I can explain your options for eliminating debt and obtaining financial relief and guide you through the bankruptcy process. Reach out to my office in Albuquerque, New Mexico, to request your free consultation.