At McElroy & Associates, We Understand That Bad Things Can Happen To Good People

Get A Fresh Start Through Bankruptcy

3 myths about filing for bankruptcy

On Behalf of | Mar 13, 2024 | Consumer bankruptcy |

Many people Tennessee consumers are reluctant to file for bankruptcy because of some of the myths involved. While bankruptcy is not something to take lightly, it can provide those in debt with a clear path to getting back on their financial feet.

Many reasons to file for bankruptcy

Bankruptcy myths persist because of misconceptions that anyone who files has to do so because they aren’t able to handle money properly. The truth is people file for a wealth of reasons. Nevertheless, these three common bankruptcy myths persist:

  • Those who file for bankruptcy are financially irresponsible
  • Bankruptcy discharges all past debts
  • Your credit will be ruined forever

Not all who file for bankruptcy are fiscally irresponsible. Job loss, divorce, medical bills and the like, all contribute. Financial fallout from recent economic conditions is also responsible.

Bankruptcy gives debtors a fresh start, but not all debts are discharged. Domestic support obligations cannot be released under any circumstances. Tax debts may be reduced, but criminal fines and restitutions are not eligible for discharge.

Your credit score will indeed take a hit when you file for bankruptcy, but that action is temporary. Within a few months, you should be able to apply for new credit at a higher rate. You’ll eventually recover as you pay off your debt and remain on time with payments.

What bankruptcy can do for you

Filing for bankruptcy can give you an affordable path to the future. If you have considerable debt and are struggling to pay your bills, a bankruptcy filing can stop the following:

  • Foreclosure on your home
  • Wage garnishment
  • Creditor harassment
  • Vehicle repossession

Although it’s not a cure-all, filing for bankruptcy can help you devise a plan to become debt-free. Depending on their qualifications, individuals can file for two different types of bankruptcy: Chapter 7 and Chapter 11. The type you qualify for will determine how much of your debt will be discharged. Some filers may also benefit from credit counseling courses that help them learn how to better manage their money and stay out of debt once the bankruptcy is discharged.