The Great Recession has pushed bankruptcy into the national spotlight. As a result – and rightly so – there’s a lot less stigma attached to seeking debt relief than there once was.

Both Chapter 7 and Chapter 13 bankruptcy can provide significant relief to struggling debtors. However, New Jersey bankruptcy attorneys encounter many people who hesitate to file because they have misconceptions about what bankruptcy means or how the process is handled.

Myth #1: People end up in bankruptcy because they are too irresponsible to manage their money

This couldn’t be farther from the truth. While a very small percentage of people wind up in bankruptcy because of excessive consumer spending, most bankruptcies are related to life circumstances that are outside of most people’s control. Most bankruptcies can be traced to three main causes: job loss, divorce and serious illness.

Myth #2: You can spend all you want right before you file

Intentionally going into a lot of debt right before filing for bankruptcy is considered fraud, and fraudulent debts cannot be discharged in bankruptcy. If you’re considering filing, limit your spending to the reasonable necessities.

Myth #3: If you file for bankruptcy, you can never get more credit

Again, this is not true. While bankruptcy does do some temporary damage to your credit score, the fallout is often less severe than if the debts had simply sat unpaid. If you focus on responsible credit use after bankruptcy, you can qualify for credit cards, auto loans and mortgages much sooner than you might think.

Myth #4: Bankruptcy instantly will solve all your financial problems

Bankruptcy is the best first step for a lot of struggling debtors, but success takes work. Some debts, including alimony, child support and most student loans, cannot be discharged in bankruptcy. Further, some filers will have to relinquish property or make monthly payments to pay off some debt.

These are only a few of the many common misconceptions about consumer bankruptcy. If you have questions, don’t hesitate to talk to an attorney.

Source: U.S. News and World Report, “5 Bankruptcy Myths Debunked,” Susan Johnston, May 14, 2012.