Common Misconceptions About Consumer Bankruptcy

Many people who would benefit from declaring bankruptcy hesitate to do so because of false stereotypes and misconceptions, such as that bankruptcy is the easy road or that it signifies irresponsibility or failure. But, if you are struggling to make ends meet, declaring bankruptcy — especially Chapter 7, the most common form — could give you debt relief so that you can begin to a financial restart. Most often, bankruptcy can be your saving grace to getting your life back on track.

If you or a loved one is considering filing for bankruptcy, there is no one more experienced than the team at Bradford Law Offices, PLLC. They understand what you are going through and know how valuable declaring bankruptcy can be for reclaiming your life. They can work with you directly to dispel any misgivings that you may have.

Bankruptcy Myths

There are several main misconceptions about bankruptcy. These include the following:

Myth: Bankruptcy Is a Quitter’s Game

There are many misconceptions surrounding bankruptcy that are based in fallacy, one of which is the idea that to declare bankruptcy is to take the easy way out. In reality, there are many hurdles you must overcome to declare bankruptcy.

In order to file for bankruptcy, you must collect an expansive set of financial records, including credit card statements, loan documents, bank statements, and pay stubs, and list all your assets and estimates of their worth. Then, you will need to fill out numerous bank-required documentation detailing your income and expenses, some of which can be up to 100 pages long. You will also be required to attend a mandatory credit meeting before you can officially file. Considerable work goes into declaring bankruptcy, and though it is manageable, it’s not easy, which is why people often turn to an experienced lawyer like those at Bradford Law Offices, PLLC to lessen the burden and to make sure all their paperwork is correct.

Myth: I Will Never Fix My Credit

Another false interpretation of bankruptcy is that once you declare, your credit is ruined forever. Most often, this is not the case. Though bankruptcy will stay on your credit report for up to ten years, you can start rebuilding within a couple of months. In addition, credit card companies look more favorably upon someone who declared bankruptcy than upon someone in a similar situation who continued to struggle and miss debt payments. For this reason, you often will be viewed as a better credit risk than someone who is still in debt.

The more time that passes, the easier it will be to increase your score and the less impact bankruptcy will have on your financial decisions. This means that in the long haul, declaring bankruptcy is better for your credit than continuing to live with mountainous debt.

Myth: I Will Lose Everything

Though your assets will be thoroughly assessed during the filing process, there are exemptions to what will be repossessed. For example, very few people lose their home during the bankruptcy process, and they often will retain any property that is necessary for work. Despite what pop culture depicts, choosing to declare bankruptcy does not mean that you will end up homeless.

Myth: There is a Minimum Amount of Debt Required to File for Bankruptcy

There is no minimum amount of debt required. The key factors that dictate whether you can file for Chapter 7 bankruptcy are:

  • Whether your creditors can work with you to come to an agreement
  • Your ability to repay your debts without relying on bankruptcy
  • The results of your means test
  • Other facts specific to your case

Typically, Chapter 7 bankruptcy is for people whose debts total more than 40 percent of their annual income, people whose debts qualify to be discharged, or people whose debts could not possibly be paid off in five years, even after extreme measures.

There are many reasons why bankruptcy may be beneficial to you, especially if you find yourself constantly struggling to pay rent on time or if your current job status prevents you from making ends meet. The perception of bankruptcy is consistently untrue or exaggerated; do not let society’s myths interfere with your ability to take care of yourself.

How Do I Declare Chapter 7 Bankruptcy?

One of your first steps when declaring bankruptcy is to look for a lawyer. Though additional filing support is technically optional, the process requires an extensive collection and completion of documents that can be overwhelming if you choose to do it alone. At Bradford Law Offices, PLLC, we can help this process be less cumbersome so that you can focus on other important issues.

Aside from contacting a lawyer, your next step in filing for Chapter 7 bankruptcy is to take the means test, which looks at your incomes, assets, and expenses to determine if you have any disposable income to put toward your existing debt. If you pass the means test, your medical and credit card debt will be forgiven. If you fail the means test, you will not be eligible for Chapter 7 bankruptcy. However, you can retake the test in six months to see if you qualify.

After passing the test, you will need to collect all your financial records from the past six months and schedule an appointment with a credit counselor. From there, you and a lawyer can determine what forms you need to fill out and what options you can pursue while you try to regain financial stability.

Let the Lawyers at Bradford Law Offices, PLLC Work for You

At Bradford Law Offices, PLLC, we have the skills and experience necessary to work closely with you during this challenging time. You have so much to worry about, and we can help ease the burden. Don’t go through this process alone. Call our Chapter 7 bankruptcy team at (919) 758-8879 to schedule a consultation, so we can help you get your life back on track.