Many Tennessee residents think of bankruptcy as the worst thing that could ever happen to a person. Even today, bankruptcy has a stigma attached to it, but this is because many people are uninformed of the process and how it can help a person drowning in debt get a fresh start on their life as well as their credit score. Here are some of the most common myths about bankruptcy.
Many people believe that they will lose all their assets when they file for bankruptcy. On the contrary, the bankruptcy process has many procedures in place designed to help people keep their assets. People can work with their lenders to come up with a repayment plan that will allow them to keep everything and keep debt collectors from harassing them.
Another common myth is that a person's credit score will be ruined forever and they will never be able to buy a house or a car. A person's score will go down dramatically after a bankruptcy, but once the person shows responsibility and starts paying debts on time, that score will go up. It's not uncommon for many people to see drastic improvement in just several months after a bankruptcy filing, so it's not the end of the world.
After a bankruptcy filing, consumers are forced to attend debt counseling classes. These classes will teach them how to handle money and create a budget so that debt does not spiral out of control again. Although a bankruptcy won't cause a person to lose his or her job or scar a person for life, it's not ideal to keep going through the process multiple times. It's important for consumers to learn from their money management mistakes and be able to live debt-free.
Source: Investor Guide, "Debunking Four Myths of Bankruptcy," Jon Clarke, April 3, 2014