When you find yourself faced with mounting debt, bankruptcy is often a good option. According to U.S. News & World Report, people file for bankruptcy for many reasons. There are also many steps involved to determine whether the process is right for the individual.
If you are thinking about filing, the first step is to get the facts. Here are a few common misconceptions about bankruptcy, so you can make an informed decision.
Your credit is forever impacted
It is true that a bankruptcy filing remains on your credit report for ten years. However, that does not mean your credit score will remain unfavorable that entire time. There are lots of steps you can take to increase it, including signing up for a secured credit card that requires a deposit. If you continue making on-time payments each month, you can transition to a regular card in about a year, which enhances your score even further.
Only financially irresponsible people file
In many instances, factors outside a person’s control contribute to their financial instability. This is especially true with medical debt, as many treatments are prohibitively expensive, even with insurance in place. Going through a divorce can also have a negative impact on your finances, as can the loss of employment. Many people who file are not irresponsible, but simply the victims of bad luck.
You can get rid of all past debts
While chapter 7 can discharge many types of debt, others will remain your responsibility. Taxes owed, student loans, child support, and other forms of debt are usually not included within the filing. However, settling other types of debt can help you focus on what remains, while also relieving some stress surrounding your financial status.
While it is true bankruptcy is not intended as a cure-all for all financial matters, it can get your finances back on track. As soon as the process is complete, you can begin rebuilding your finances again.