Filing for bankruptcy is a major decision that will have significant consequences (for better and worse). Therefore, the decision should not be made lightly. On the other hand, too many Americans who could truly benefit from bankruptcy choose not to file due to fear or a misunderstanding about the likely outcomes.
According to a recent news article, less than 1 percent of households in the United States file for bankruptcy each year. Last year, it was just over 752,000 people. But based on Federal Reserve estimates, approximately 14 percent of American households (equivalent to about 17 million people) have more debt than assets. Why don’t more people choose to utilize a legal tool that could quite literally change their lives?
Misinformation is a Deterrent
Too many people hold incorrect ideas or assumptions about bankruptcy. These are common beliefs about bankruptcy that typically aren’t true:
You’ll lose everything if you file: Courts recognize that depriving someone of the few assets they have is counterproductive and would likely lead to even worse hardship in the future. Most filers are able to keep most of their important assets. This isn’t a guarantee in all cases, but it is worth exploring with an attorney.
You’ll never get a loan or credit again: It’s true that bankruptcy does significant damage to your credit score, and that filing for Chapter 7 stays on your credit report for about 10 years. However, you can begin rebuilding credit as soon as your bankruptcy is completed, and many filers are able to get access to credit sooner than they expected.
You should wait until you are completely out of options: Obviously, you shouldn’t pursue bankruptcy if you can manage debt in another way. However, if you cannot resolve it on your own, it may be a mistake to wait to file until all your assets have been depleted. It’s not worth depleting your retirement assets trying to pay down your debts, for instance, if they’ll be wiped out in bankruptcy anyway. Doing so just leaves you in a more financially precarious position.
Talk To An Attorney
Bankruptcy may be right for you, or there may be better ways to resolve your debt issues. The simple truth is that you may not be able to know which path to take until you talk to a knowledgeable professional. Speak with an experienced bankruptcy attorney to determine how to best resolve debt and gain a fresh financial start.