Common Misconceptions About Bankruptcy

Bankruptcy is often viewed as a last resort, a financial pitfall from which it's hard to recover. It’s surrounded by myths and misconceptions that can prevent individuals from considering it as an option, even when it could provide the financial relief they need. If you’ve ever thought about filing for bankruptcy but held back due to common misunderstandings, you’re not alone.

At The DeVries Law Firm, we help clear up these myths and educate our clients on the realities of bankruptcy. Let’s take a closer look at some of the most common misconceptions.

1. Bankruptcy Means Losing Everything

A prevalent myth is that declaring bankruptcy means you will lose all of your possessions, your home, and your car. While bankruptcy does involve the liquidation of certain assets, Chapter 7 bankruptcy (which is the most common form) has exemptions designed to protect essential property. In fact, most people who file for bankruptcy under Chapter 7 are able to keep important assets like their home, car, and retirement accounts.

Even in Chapter 13 bankruptcy, where you must repay some of your debts over time, you typically don't have to sell off assets. The goal of bankruptcy is not to leave you destitute but to help you reorganize and give you a fresh financial start.

2. You Can Only File for Bankruptcy Once

Another myth is that you can only file for bankruptcy once in your lifetime. While there are time limits between bankruptcy filings, you can file for bankruptcy more than once. The restrictions depend on the type of bankruptcy and when you last filed.

For example:

• If you’ve filed for Chapter 7 before, you may file again after eight years.
• If you’ve filed for Chapter 13, you may file again after two years.

Filing for bankruptcy is a tool to reset your financial situation, and if you qualify, you can use it again as needed.

3. Bankruptcy Will Ruin Your Credit Forever

Many people are concerned that filing for bankruptcy will permanently destroy their credit, but the truth is more nuanced. Bankruptcy does stay on your credit report for up to 10 years (for Chapter 7) or 7 years (for Chapter 13). However, this doesn’t mean that you will never be able to repair your credit. In fact, bankruptcy often gives you the opportunity to rebuild your credit faster than if you continue struggling with overwhelming debt.

Once you’ve discharged your debts, you are no longer legally required to repay them, which can actually improve your credit score in the long term. Many people who have filed for bankruptcy go on to successfully rebuild their credit through responsible borrowing and timely payments after the process is complete.

4. You’ll Lose Your Job or Be Unable to Get a New One

Some people worry that declaring bankruptcy will lead to the loss of their job or prevent them from getting hired in the future. The good news is that bankruptcy does not impact your employment unless you’re in a specific role where a bankruptcy filing might be a conflict of interest, such as for certain financial or government positions.

Employers are legally prohibited from discriminating against you for filing for bankruptcy. However, it’s important to know that some companies may perform background checks, and bankruptcy may show up on your report. But the vast majority of companies are more focused on your qualifications, work experience, and skill set than your financial history.

5. You Have to Be in Overwhelming Debt to File for Bankruptcy

Many people assume that bankruptcy is only an option for those in severe financial distress with massive debt. The reality is that bankruptcy can be an option for anyone struggling with debt, regardless of the amount. If you’re finding it difficult to keep up with monthly payments, your credit card debt is piling up, or you can no longer make ends meet, bankruptcy may be a viable solution.

Sometimes, filing for bankruptcy early—before your debt reaches a point of crisis—can help prevent things from getting worse and allow you to keep more of your property in the long run.

6. You Can’t Discharge All Types of Debt

Another misconception is that bankruptcy only discharges certain types of debt. While it’s true that certain types of debt, like student loans and child support, are typically not dischargeable, many types of unsecured debt (like credit card debt, medical bills, and personal loans) can be wiped out in bankruptcy. This can give you the breathing room you need to recover financially.

It's also worth noting that Chapter 13 bankruptcy can allow you to restructure and repay debts that would otherwise not be dischargeable, such as past-due mortgage payments, over time. This can help you avoid foreclosure and keep your home.

7. Bankruptcy Is a Sign of Personal Failure

Many people mistakenly view bankruptcy as a personal failure, a stigma that can deter them from considering it as a solution. In truth, bankruptcy is a legal tool designed to help individuals and businesses regain control of their finances. Life happens—whether it’s medical emergencies, job loss, or other unexpected events—and sometimes, filing for bankruptcy is simply the most responsible step to take when faced with insurmountable debt.

Choosing bankruptcy doesn’t mean you’ve failed; it means you’ve taken proactive steps to reset and improve your financial situation. It’s an opportunity to gain a fresh start and work towards a more stable financial future.

8. Filing for Bankruptcy Is Too Complicated

While bankruptcy may seem overwhelming, it’s actually a structured process that can be navigated with the help of a skilled attorney. At The DeVries Law Firm, we simplify the bankruptcy process for our clients, helping them understand their options and guiding them through every step of the way. From paperwork to court filings, we’re here to provide the support you need.

How We Can Help

If you’ve been struggling with debt, it’s important to fully understand all of your options, and bankruptcy might be the best solution to provide relief. By debunking these myths and clarifying the process, we hope you feel empowered to make the right decision for your financial future.

At The DeVries Law Firm, we specialize in guiding clients through the bankruptcy process, helping them make informed decisions and achieve a fresh financial start. If you’re ready to explore your options, we’re here to help.

For more information or to schedule a consultation, please visitour website. Let us help you take the next step toward financial freedom.