Many people consider “bankruptcy” to be a dirty word. However, the truth of the matter is that many people across California can benefit significantly by filing for it. According to one study, over 20 million Americans would benefit in the long run if they would file for bankruptcy.
One reason many people are hesitant to file is due to the litany of myths that persist about bankruptcy. By separating fact from fiction, many people may discover they can directly benefit.
Myth #1: It will ruin your entire financial future
In the immediate aftermath of filing for bankruptcy, you can definitely expect your credit score to take a hit. Depending on which specific type of bankruptcy you file for, it will remain on your credit report for between seven and 10 years. However, your credit score will start to rebound shortly after filing. In as little as six to eight months, many people find their scores begin to slowly climb back up. There are plenty of actions you can take during the bankruptcy to improve your rating, such as getting and paying off a secured credit card.
Myth #2: Paying off the debts on your own is always the better option
You need to have a frank conversation with a bankruptcy attorney to determine what your personal best option is. In general, if you spend over 50 percent of your income trying to pay off a debt, then bankruptcy will be the preferable option. If you believe it will take more than five years to pay off the debt, then you need to look into bankruptcy.
Myth #3: Bankruptcy is a personal failing
Ultimately, many people hesitate to file for bankruptcy because they worry about what others will think. It is vital to remember anyone can fall victim to debt. It is by no means a sign of a personal failing. For the most part, if you do not want anyone to find out about your bankruptcy, then no one needs to know.