Filing for bankruptcy can give you financial relief if you are hard-pressed by debts and you have no other viable alternative to repay the debts. The creditors will be giving you a hard time which will undoubtedly affect your peace of mind, and filing for bankruptcy can help ease your anxiety. However, this can be a daunting task for many people, especially for those who lack basic knowledge about personal insolvency. There are also several stigmatic misconceptions about declaring bankruptcy that is widely believed as facts, yet they are incorrect.
As such, this article debunks 7 misconceptions about bankruptcy to help you understand how the process works.
1.Filing For Bankruptcy Makes You A Failure
Does filing for bankruptcy make you a failure? The most common misconception many people have is that individuals who file for bankruptcy are failures in life. This is one of the most frequently asked questions, especially for homeowners in Canada and in the United States who are unable to pay back their mortgage loans. The answer to that question is no, filing for bankruptcy does not make you a failure. Most people fall into debt due to factors beyond their control, like job loss or medical emergencies, while others have to file for bankruptcy because of their mismanagement of funds in some instances, it does not necessarily mean that they are at fault. Bankruptcy allows them to correct their mistakes and make better decisions in the future.
2.You Lose Everything
When you file for bankruptcy, you are certainly going to lose some property that will be sold by the trustee to settle your loan. However, you will not lose everything as believed by other people. You can retain assets like cars, tools, as well as equipment for work that you use to generate money. You will also not lose the household property that you use every day together with your family.
3.You Can Hide Certain Assets
When you file for bankruptcy, the law requires you to declare all your assets to the bankruptcy trustees who will take over the loan. Non-disclosure of certain assets can result in harsh consequences that can result in the suspension of your bankruptcy order. This misconception that you can hide some assets will not do you any favors since it can worsen your situation. The bankruptcy trustee is there to help you with a debt management plan not to steal your assets, so it is essential to disclose all information about your assets.
4.Everyone Will Know About Your Bankruptcy
Another common misconception is that some individuals believe that other people will soon find out that you have filed for bankruptcy. Official bankruptcy notices are published in the Insolvency Register and these are specifically meant for the creditors. Apart from financial institutions, other individuals may not access this information about people who file for bankruptcy. All the same, you can seek advice from your debt management trustee if you are in doubt, but confidentiality is highly prioritized when you file for bankruptcy.
5.You Can No Longer Work
Some people believe that they will no longer be able to work after filing for bankruptcy, which is not true. You can continue working at your job so that you can repay your debt. Working is a sign that you are committed to repaying your loan, so bankruptcy does not affect your job. However, if you are working as a director of a company, you need to get an exemption from the court so that you can continue in your role. Most people in positions within the financial sector often face some restrictions concerning bankruptcy. However, you should seek insolvency advice if you belong to this group.
6.Bankruptcy Can Ruin Your Life
Another misconception believed by many people is that bankruptcy can ruin your life and you may not be able to get a loan again. Indeed, bankruptcy will impact your life for a specific period, but it is not true that it will ruin your life for good. It lasts for 6 years then you can begin rebuilding your credit file again which can help you to access loans in the future.
7.Bankruptcy Is Costly
Some people also believe that bankruptcy is expensive, but this is not true. You can lose some money if you hire a lawyer, but this will help you eliminate the burden of having a huge debt at hand. Filing for bankruptcy also gives you peace of mind and financial relief while you plan for your future so the initial costs are definitely worth it.
Filing for bankruptcy gives you relief if you are under immense pressure from debts. While the whole process can be challenging, many of the misconceptions you probably believe are simply not true. To dispel these myths, you can seek advice from your debt management trustee.
