In the world of finances, “bankruptcy” is the big bad “B” word that most people try their hardest to avoid. It’s a word that carries with it a social stigma, a last resort before going completely broke. It’s ironic then that bankruptcy in and of itself is a financial strategy. In some cases, bankruptcy can be a person’s best option. So how did bankruptcy get such a bad reputation? Let’s take a look at six common bankruptcy myths:
Your Credit Will Never Recover from Bankruptcy
Let’s get the biggest myth out of the way first. A common misconception is that bankruptcy is so detrimental, that those who choose this option will never fully recover. Bankruptcy will stay on a credit report anywhere from 7-10 years, hardly different than many debts that end up on one’s credit report. There are also methods to make sure your credit can be improved. A common route is taking out a secured card to reestablish and restore credit.
Those Who File Bankruptcy are Financially Irresponsible
Okay, so there may be exceptions to this rule – but in general, it’s a stigma that’s largely false. When people hear about bankruptcy, they tend to think of someone racking up credit debt on frivolous purchases, bad investors, and people trying to game the system. The reality is that most who file for bankruptcy actually encounter serious and unexpected problems. Be it from a life threatening illness, a sudden divorce with a difficult partner, or simply extended unemployment, you may be surprised to learn how little it takes to be in a difficult financial situation.
You Can Go on a Shopping Spree Before Filing
All that said, it’s very important to point out that the concept of shopping and racking up debt just before filing bankruptcy is not only fraud, but it’s nearly impossible to get away with. Bankruptcy is a serious financial decision that is backed up by a prolonged period of time in debt. It’s not uncommon for a court to throw out recent debts on the basis that a shopping spree isn’t the source of all the financial hardship and is in fact, fraud.
All Debts Will Be Cleared
While bankruptcy is a great way to get a fresh financial start, it is by no means a clean slate – certain debts simply cannot be discharged in a bankruptcy. Regardless of its size, child support and alimony will not be discharged in a bankruptcy, nor would restitution payments that are required as a result of a committed crime. Tax debts vary in many situations, but in some cases, they can be either discharged or reduced.
I Can’t Go Bankrupt Without My Spouse Being Dragged Into It
A very common misconception is that a married person cannot file for bankruptcy on their own. While this isn’t true, it’s easy to see how people make this assumption. After all, so many assets get tied together in marriage. It is possible for a spouse to file on their own without affecting their spouse’s credit or assets.
Bankruptcy can seem like a scary process, especially with all this misinformation going around. But sometimes, it’s a person’s best option. If you or a loved one in New Jersey is looking for financial relief and are considering bankruptcy, let an experienced and knowledgeable attorney help! Contact Joel Spivack today to schedule your consultation.