Common Bankruptcy Myths
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Common Bankruptcy Myths
Many people have misconceptions about bankruptcy that, unfortunately, prevent them from turning to this debt relief solution when they need it. As an individual, bankruptcy is not an overly complex process nor is it expensive. Here are some common myths you may have about filing for bankruptcy.
Myth: People who file for bankruptcy are not responsible.
Actually, the leading cause of bankruptcy is medical debt, a problem that can affect even the most financially responsible person who is struggling with a long-term illness, unemployment, or even a short stay in the hospital which can cost tens of thousands of dollars. Most people who file for bankruptcy have simply run into serious personal issues like losing their job, getting a divorce, or getting sick.
Myth: Bankruptcy will permanently destroy your credit.
This couldn’t be farther from the truth! Bankruptcy remains on your credit file for ten years, but the impact of the bankruptcy reduces over time. You can begin building credit again as soon as your bankruptcy is discharged. Most people begin with a secured credit card right after bankruptcy and qualify for a regular credit card within just 6 to 12 months. If your credit is already very bad, bankruptcy can actually improve it.
Myth: Bankruptcy will discharge all debts.
While bankruptcy can give you a fresh start financially, it cannot discharge all types of debts. For example, restitution due to a criminal conviction and domestic support obligations like child support can never be discharged. Credit card debt, medical debt, auto loans, mortgages, and most types of unsecured and secured debts can be discharged, however, including student loans in some cases.
Myth: You lose everything you own in bankruptcy.
This is not true. In the vast majority of cases, you will be able to keep your home, car, and most if not all of your personal property. Filing bankruptcy can protect these assets with removing and reducing debt. The vast majority of Chapter 7 bankruptcy cases in Nevada are no-asset cases in which debtors give up no belongings. This is because bankruptcy allows you to use exemptions to keep belongings like your home, jewelry, and heirlooms up to a limit, and a certain amount of equity in a car.
Myth: Bankruptcy can’t help me with a large unpaid tax bill.
Tax debt relief can be possible with bankruptcy as long as the tax bill is not very recent. In many cases, Vegas BK can negotiate with the IRS and the Nevada Franchise Tax Board to reduce your tax debt and get an extended payment plan to help you through a rough financial situation.
Myth: Paying off debt is better.
While paying off debt and saving your credit is certainly the best-case scenario, this is not always possible. You may be unable to pay off or settle the debt for any number of reasons, including long-term unemployment, divorce, illness, or debt that is too great a burden. If you are overwhelmed by debt and/or creditors are taking serious action against you like wage garnishment and foreclosure, bankruptcy may be the best option in your situation to help you recover.
Bankruptcy can be a very good option if you are struggling financially and feel like you can never get out from under the debt. Bankruptcy is not as costly as you may think and it can end up saving you substantially over the next few years while giving you a clean slate to reestablish your credit. Contact the bankruptcy lawyers at Vegas BK to learn more about bankruptcy and schedule a free consultation with a Las Vegas bankruptcy attorney.