Bankruptcy. The simple word brings thoughts of someone being absolutely broke, without a cent to their name. For many people, that's exactly what bankruptcy is, too—an option that's only a last resort for people who can't handle their money.
The thing is, that couldn't be further from the truth. There are a lot of things people get wrong about bankruptcy, and unfortunately, those misconceptions could cause some people not to consider their options. And for many people, bankruptcy is the best thing that ever happened to them. Here's a look at three of the biggest things people don't understand about bankruptcy.
Wrong Idea #1: People Who File For Bankruptcy Are Irresponsible With Finances Sure, spending money like there's no tomorrow and racking up insurmountable bills can eventually lead a person to bankruptcy, but many times, there are actual, legitimate reasons for a person to file. When a person is filing for bankruptcy, it's much more likely that they lost a job, got divorced, or had serious medical issues. In fact, a study from several years ago revealed that three out of five bankruptcies were due to medical issues.
Wrong Idea #2: People Who File For Bankruptcy Will Ruin Their Credit This one isn't just wrong, it's the opposite of the truth. Struggling with bills to the point that they're not getting paid is what ruins credit. Bankruptcy is actually the first step towards digging out of a deep financial hole. If people are considering bankruptcy, there's a fair chance that their credit is already suffering. Filing for bankruptcy isn't going to make anything worse. If a credit score is already low, bankruptcy actually raises it in many cases.
A bankruptcy is listed on a person's credit profile for 7 or 10 years, depending on the type. During that time, someone's credit score alone doesn't note a bankruptcy. When someone reviews a credit profile, they'll certainly see the bankruptcy filing. But if the filing was several years ago, and it's clear the applicant is working to restore things, they will often be willing to work with the applicant.
People considering bankruptcy often have no idea that it's the easiest and fastest answer to their financial struggles (and the one with the shortest long-term ramifications). If you're thinking about bankruptcy, make sure you contact a bankruptcy attorney at a law firm like Reppe Law Office so you're getting the real information about just how beneficial it can be!