Dispelling Bankruptcy Myths In Cleveland, Tennessee

There is often much confusion surrounding bankruptcy in Tennessee, especially if you believe some of the common myths repeated by friends or family members. Even though they mean well, the details they pass on are often incorrect, making it crucial to find reputable information.

At Richard Banks & Associates, P.C., our lawyers have been helping address debt and bankruptcy issues in Cleveland and other Tennessee communities for decades. We offer our considerable experience to discuss your Chapter 7, Chapter 11, Chapter 12 or Chapter 13 bankruptcy needs in a free initial consultation. To begin, we will dispel a few common bankruptcy myths.

Bankruptcy Is Only For Irresponsible Consumers

Many people believe that irresponsible spending leads to bankruptcy and that people who have to file have made significant financial mistakes.

The reality is that debt issues can happen to anyone. Some of the top reasons for filing for bankruptcy include insurmountable medical bills, job loss, income reduction, serious illness and divorce, to name just a few. Someone who gets laid off during an economic recession and suddenly cannot handle their debt may not be entirely at fault but could still potentially benefit from exploring bankruptcy options.

Bankruptcy Does Permanent Damage To Your Credit

One of the reasons that some people refuse to file for bankruptcy is that they think it is going to permanently lower their credit score. They believe this means they will not be able to get credit cards, buy a home or purchase a new car. In reality, bankruptcy only temporarily damages your credit score immediately after you file.

There are many steps you can take to rebuild your score such as using secured credit cards that require a deposit. Your credit score can and will recover over time, and it often helps to file for bankruptcy. After all, if you are missing payments, your credit score will also be lowered every month. Bankruptcy helps to eliminate or reorganize debt, allowing you to work on rebuilding your score and creating a brighter financial future.

Bankruptcy Leads To The Loss Of Personal Property

Some people are also worried about filing because they fear the loss of their personal assets. However, in Chapter 13, you can reorganize your debt and do not have to liquidate everything. Even with Chapter 7, you are only required to liquidate nonexempt assets, and there are many potential exemptions for things, including family heirlooms, the family home, a primary vehicle and even the tools of your trade.

Bankruptcy Eliminates All Past Debts

Bankruptcy is a way to eliminate many debts, but not necessarily all. Some things that cannot be eliminated via bankruptcy include student loans, back taxes, child support obligations or other judgments made via court order.

You Can Spend Freely Right Before Filing Without Having To Repay Debts

You may be tempted to spend recklessly before filing because you are going to eliminate the debt anyway. But this is prohibited, and some courts consider this to be a type of bankruptcy fraud. Spending should stay within or below your normal limits.

Bankruptcy Will Solve All Your Money Problems

As noted above, bankruptcy cannot eliminate all debts or solve all your financial woes. The key is to focus on budgeting after filing. Bankruptcy can be a tool that you use to resolve some of your financial problems. However, it works best when combined with other steps such as creating a post-bankruptcy budget, practicing responsible spending and living within your means.

Paying Off Debt Is Better

There are those who believe it is better to pay off the debt eventually rather than filing for bankruptcy. While this is true in many cases, it is not always so, especially if it is unrealistic for you to pay it back on your own. Remember that numerous missed payments will lower your credit score and increase the amount of debt you have, while possibly posing high interest rates.

Call Today For A Consultation

If you would like to discuss your bankruptcy options with an experienced Tennessee attorney, use the online contact form or call 423-219-3299 to set up a consultation.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.