As is the case with many topics and issues, bankruptcy has its fair share of myths. Given the incredibly negative reputation that bankruptcy has, this isn’t surprising. However, bankruptcy isn’t the huge “problem” it’s often portrayed as being. In fact, it’s more appropriate to view bankruptcy as a solution to a problem, rather than a problem in and of itself.
Some bankruptcy myths aren’t unexpected. For example, many people think that filing for bankruptcy is like asking for a permanent blemish to be added to their record and reputation. Although a bankruptcy will remain on your credit report for some time, your reputation will not be dictated by one bankruptcy filing.
There is also the myth that, in some way, bankruptcy is improper or, perhaps, even immoral. In fact, the concept of forgiveness of debt can be found in Deuteronomy. Further, the law exists to help people in trouble get a fresh start.
Another myth is that those who file for bankruptcy will never receive credit again. Like the myth that bankruptcy filers will forever have a blemish on their record, this absolute line in the sand regarding new lines of credit is untrue. If you work at it, your financial record can improve and new lines of credit will become available.
Finally, there is the belief that a bankruptcy filer will lose all their possessions. Again, this is untrue. There are exemptions during the bankruptcy process that can leave your prized assets, such as your house, car and other personal property, untouched during the bankruptcy process.