Millions of people need to file Chapter 13 bankruptcy each year due to financial struggles, but a large percentage of these individuals do not have a full understanding of this legal process. If you are unable to pay your living expenses and debts, bankruptcy may be a viable option for you and your family. However, you should familiarize yourself with these common myths before you file bankruptcy.
Bankruptcy Discharges All Debts
Many people believe they can file bankruptcy and wipe out all of their debts. Unfortunately, this is not the case, since certain types of debt will still need to be paid.
If you owe child support, alimony or restitutions from a crime, you will still be responsible for paying these debts. While bankruptcy will help you get a fresh start, it will not remove these legal debts.
You Can Go On a Shopping Spree Before Filing
Spending large amounts of cash or utilizing your available credit right before filing Chapter 13 bankruptcy is actually considered a form of fraud, which means the debt will not be discharged. If you are struggling to pay your debts, you should NOT accumulate any further debt.
Avoid making large purchases or utilizing any of your available credit before, during and after filing bankruptcy.
People Who File Bankruptcy are Irresponsible
There is an unfortunate stigma associated with people who file bankruptcy. While some individuals who need to file do need to learn how to manage their finances better, most people will need to file due to a situation that was out of their control.
The loss of a job equals an extreme reduction in income, which will prevent individuals from paying basic living expenses and their debt. In addition, a medical condition that has decreased a person’s ability to work can also result in financial hardship. Since there are many circumstances that can leave a person without income, it is important to understand that people who file bankruptcy are not always irresponsible.
Bankruptcy Ruins Your Credit
The inability to pay your debts in a proper manner can lower your credit score drastically. While it may affect your credit score on a short-term basis, filing bankruptcy may be your best option to gain control of your finances and restore your credit in the future.
A few months after filing and making your scheduled bankruptcy payments, apply for a secured credit card with your bank. You will need to put down a cash deposit, which will serve as your credit limit. Make a small purchase using this credit card and pay it back quickly. This will help you rebuild your credit in a slow, responsible and disciplined manner.
If you are considering bankruptcy, you should know all of your options. Contact Collins & Arnove in Allen, TX, at 972-516-4255 to determine if Chapter 13 bankruptcy is right for you.
Collins & Arnove | Chapter 13 Bankruptcy Allen TX | 972-516-4255