Debt is a problem that plagues many Americans. CNBC reports that the average one has $90,460 of it. In many cases, it accrues due to unfortunate circumstances or unforeseen obstacles like sudden illness rather than mismanagement.
One option for dealing with it is filing for bankruptcy. However, many individuals are reluctant to do so due to the many misconceptions surrounding the process.
1. It is shameful
The absolute biggest myth surrounding bankruptcy is that it is an embarrassing act. On the contrary, it is a sensible pathway to a fresh start. The government provides it as a way for those who need help to get it, and it does so because it is not uncommon to fall into situations where relief is necessary. Even the famous have had cause to use it in the past, including public figures like Rush Limbaugh and President William McKinley.
2. It means the loss of everything
Another barrier to filing is the fear of losing everything — houses, cars and possessions. In reality, this really depends on the type of bankruptcy. In a Chapter 7 one, the trustee may sell belongings to cover arrears. There are items exempt from sale. Residences and vehicles may fall under this umbrella depending on how much equity is in them. Someone invading your home to inspect its contents and carry them off is also unlikely. Chapter 13 bankruptcy does not involve asset liquidation, so individuals may retain their property.
3. It forever ruins credit
There is also trepidation about possibly becoming ineligible for things like auto loans. While there may be a temporary effect of this sort, credit eventually recovers.
Bankruptcy is a viable tactic for clearing away debt. It is not a bad thing as the fallacies surrounding it tend to imply.