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5 Common Bankruptcy Misconceptions

The word “bankruptcy” seems to carry a certain stigma for many people. A person who files for bankruptcy often earns the reputation of being a deadbeat who would rather make his bills go away than actually pay them. The truth is, consumer debt is a real and scary problem for many, and there are times when you need to admit that you simply cannot afford to pay back everything you owe. If you are experiencing great financial strain, it might be in your best interest to contact the right bankruptcy attorneys in Ohio.

You may be wondering how much of a negative effect bankruptcy will have on your life, or if you are even eligible to file. Is bankruptcy only for people with no job, or those who have a certain dollar amount in debt? These and other myths surround bankruptcy, but the truth is, people of different financial means and debts can qualify. The following are some common misconceptions about filing for bankruptcy:

  1. If you need to file for bankruptcy, then you must be financially irresponsible. We often see wealthy Hollywood actors or famous singers who appear to blow through their fortunes and end up filing for bankruptcy to rid themselves of millions of dollars in debt, and we assume they are the ultimate irresponsible people. Often, we apply this stigma to non-celebrities as well. But many people struggle with debt due to medical issues and job loss, not overspending. People often try to pay their debts for months or years before deciding to get help.

  2. Your credit will be irreparably damaged from bankruptcy. It’s true that filing for bankruptcy will lower your credit score, and will appear on your credit report for a number of years after. However, your credit is not irrevocably damaged. You can begin rebuilding your credit score right away by making timely payments on your mortgage or car loan. If you don’t have these kinds of loans, you can also get a credit card to use for reasonable charges that you pay in full every month. Avoiding carrying a credit card balance allows you to quickly rebuild bad credit.

  3. Filing for bankruptcy will solve all your financial problems. While bankruptcy can discharge many debts (like in Chapter 7) or provide you with an affordable payment plan for debt (like in Chapter 13,) it is not a “cure all”. There are certain debts that do not pass through bankruptcy, such as student loans, child support, and some taxes, to name a few.

  4. If you file for bankruptcy, you will lose everything you own. Regardless of which kind of bankruptcy you apply for, there are certain state exemptions that allow you to keep some of your property. In Ohio, for example, there are exemptions for your home, your retirement plans, and there are some in place for cash and automobiles as well.

  5. It is virtually impossible to qualify for bankruptcy. In 2005, Congress passed the Bankruptcy and Abuse Prevention and Consumer Protection Act (BAPCPA) as a way to eliminate bad faith filings and to overhaul eligibility requirements. This Act does not mean that you absolutely can’t file if you make a certain amount of money or if you don’t have a certain amount of debt. In fact, many people are still eligible to file; they now face bigger filing fees and more paperwork. The purpose of the BAPCPA is to deter people who might attempt to abuse the bankruptcy court system.

  6. Everyone’s situation is different, and what’s right for others may not be right for you. If you find yourself having a hard time making ends meet, and your bills are racking up, you may want to explore bankruptcy. Contacting an Ohio bankruptcy attorney is a step in the right direction; the bankruptcy attorneys at Cleveland Bankruptcy Attorneys have the knowledge and experience to help you review your situation and determine the best situation to help you out of your debt. Call us today for a free consultation at (216) 586-6600 or email us at advice@clevelandbankruptcyattorney.com.

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