Top Five Myths about Filing for Bankruptcy

It’s a question many people wrestle with every day: whether or not to file for bankruptcy. Debt may be piling up. You may be unable to keep up with your bills. But as any bankruptcy lawyer in South Carolina understands, many social stigmas exist about bankruptcy. These false notions make people to avoid getting the help they need.

Some of the most common myths about bankruptcy include the following:

Bankruptcy ruins your credit.

False. Credit card companies and debt collectors are quick to scare consumers into thinking bankruptcy will ruin their credit. However, the reality is that choosing to file for bankruptcy protection can help you rebuild your credit while eliminating your debts. People who file for bankruptcy can oftentimes apply for credit shortly after filing or affect your ability to apply for a loan if buying a car or a house. And with more disposable income available after successfully applying for bankruptcy, consumers often find themselves in a better position to responsibly borrow and finance.

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Bankruptcy clears all debts.

False. Bankruptcy is designed to give creditors a fresh start and eliminate certain debts, such as credit card bills and other unsecured debts. However, some debts cannot be cleared by Chapter 7 or Chapter 13 bankruptcy protection. These debts include student loans (as a result of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act), tax debt, domestic support obligations such as alimony and child support, or if you’re required to pay restitution as a result of a crime. Chapter 13 bankruptcy protection in particular is designed to help consumers rehabilitate credit while making manageable payments to eliminate debt.

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You’ll lose everything you own.

False. The misconception that debtors will lose their car, house or personal possessions may discourage many from pursuing bankruptcy protection. However – while bankruptcy laws vary in South Carolina and other states – exemptions exist that protect certain types of assets. In most cases, your house, car, household goods and clothing are protected. In addition, money saved in qualified retirement plans is often protected. Most people who file for Chapter 7 or Chapter 13 bankruptcy protection keep everything they have. For those who have a mortgage or car loan, assets are protected as long as payments are made on time.

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Married couples have to file together.

False. It is not uncommon for one spouse to have a significant amount of debt that’s only in their name. In South Carolina, the spouse with debt can file for bankruptcy to address these debts while not affecting his or her spouse’s credit. However, if spouses have debts that they’re both liable for – such as a joint credit card – it is advised to file together. If not, credit card companies and debt collectors may simply demand payment for the entire amount from the spouse that did not file for bankruptcy protection.

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You cannot afford to talk to a lawyer.

False. Many experienced South Carolina bankruptcy attorneys offer a free case consultation to all prospective clients. That way, those seeking information on whether they should file for bankruptcy can learn about which type of bankruptcy best suits their needs. An attorney can then process paperwork, gather information and successfully represent you as you file for bankruptcy in South Carolina court.

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Matthews and Megna LLC is a bankruptcy law firm in South Carolina with offices is Darlington, SC and Columbia, SC.

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