Common Bankruptcy Myths

by | Nov 28, 2012 | legal

Did you know that one and a quarter million Americans will file for bankruptcy this year?  2011 saw nearly 1.38 million file for bankruptcy protection.  It is safe to say this global recession has affected millions of Americans, not just the ones who felt no other option but to claim bankruptcy.

Some people may assume that those who file for bankruptcy do so because they cannot resist the temptation of abusing credit cards.  Although this may sometimes be the case, it is generally not so.  In most circumstances, the reason people file for bankruptcy is due to long-term unemployment, the cost of medical care and the costs associated with a divorce are the driving forces behind a person’s decision to file for bankruptcy.

Another myth relating to bankruptcy is that a bankruptcy wipes clean all debts.  while most debts do get discharged in a chapter 7 bankruptcy filing, some do not.  Certain financial obligations remain, such as alimony and child support, debts related to committing a crime, government-backed student loans and certain tax debts.  It is important to review your situation with a qualified bankruptcy attorney in Carbondale Il to determine which debts are dischargeable.

A third myth surrounding bankruptcy is a person’s ability to run up debt right before filing.  Some people assume if they are going to file, they might as well have some fun and charge up those credit cards before they do.  This is a big no-no.  Courts have determined this activity to be fraud, and such debts are cannot be discharged.  Generally, any credit taken out within six months of filing will not wiped clean.

The myth that filing bankruptcy will permanently ruin your credit is another common one.  Many people who file for bankruptcy are surprised how fast their credit begins to heal.  A good bankruptcy attorney in Carbondale Il will advise to apply for a secured credit card with a low limit and begin making the regular payments to rebuild one’s credit.  Usually, within a year, you should be able to get rid of the secured debt and apply for unsecured debt.

The last myth surrounding bankruptcy is that bankruptcy is a panacea for all financial ailments.  While Chapter 7 bankruptcy wipes out most debts and Chapter 13 reorganizes or reduces many debts, neither option is free from long term consequences.  You could lose your home.  Or, you may be able to keep your home but the payments you must agree to require you to live a very modest lifestyle for several years.

Bankruptcy attorney Carbondale IL – Are you looking for bankruptcy attorney in Carbondale, IL? The Law Office of Bradley P. Olson has been helping Carbondale residents with debt relief cases for over 14 years.

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