MYTHS ABOUT BANKRUPTCY DEBUNKED
Borrowers might receive a clean slate financially by discharging their debts through bankruptcy. Regrettably, there are a variety of reasons why people put off declaring Bankruptcy in Orlando. Borrowers often hold false beliefs about bankruptcy because of the widespread prevalence of myths and misconceptions.
Let’s discuss some of the most common misconceptions and the realities behind them below.
When you file for bankruptcy, you can get rid of all of your debts.
The bankruptcy process does not always result in a complete debt discharge. People typically file for Chapter 7 bankruptcy to get rid of all or most of their debts. However, not all debts can be eliminated through bankruptcy, even under Chapter 7.
For example, discharging student debt through bankruptcy is notoriously challenging. There are some debts that cannot be eliminated through filing for bankruptcy, and they include child support and tax obligations. In other types of bankruptcy, such Chapter 13, the borrower’s debt is not discharged but is restructured into a more manageable repayment schedule.
In the event of bankruptcy, property is seized.
It’s true that a borrower stands to lose some of their possessions in a bankruptcy proceeding like Chapter 7. It is not uncommon for assets to be seized and sold so that the proceeds can be divided among creditors. Nonetheless, compared to other states, Florida’s bankruptcy exemptions are among the highest in the country. In the event of bankruptcy, certain exemptions can prevent the borrower’s property from being liquidated.
If you file for bankruptcy, your credit will be severely damaged for the rest of your life.
There is no way around the fact that declaring bankruptcy will have a minimal negative impact on your credit score. After declaring bankruptcy, it could take years for your credit score to fully recover. Nonetheless, a bankruptcy will remain on your credit report for seven to ten years at most. Yet, in just a year or two, your credit rating will begin to rise.
In my opinion, people who declare bankruptcy are irresponsible.
Many people put off getting a fresh financial start that bankruptcy offers because they believe this fallacy. The truth is that most people who declare bankruptcy have no choice but to do so due to circumstances beyond their control. Bankruptcy is typically brought on by external factors beyond the control of the borrower, such as a marital breakup, the loss of a job, or excessive medical bills.