The lack of awareness among people regarding bankruptcy and its process creates greater problems for them in the future. It is therefore essential that you know what you are getting yourself into before filing for it. There are also a number of myths attached to bankruptcy that most of us unconsciously believe. Below mentioned are some of the myths you need to steer clear of.
Bankruptcy Incorporates All the Debts
Bankruptcy does not clear all your debts. However, debts that are unsecured, such as: utility bills, credit card debt, medical bills, and any other loans can be cleared through bankruptcy. Nevertheless, secured debts that have a particular property, such as a house or car loan cannot be cleared by filing for bankruptcy. Moreover, if you have stopped studying for less than 7 years, your student loan is excluded from bankruptcy.
Financial Irresponsibility Causes Bankruptcy
It is natural to think that people filing for bankruptcy were not responsible enough to manage their finances. However, this is far from the truth. Serious medical conditions, divorce, and losing the job can get anyone under debt. This is because if the person stayed unemployed for too long, at one point, the individual will run out of money. Similarly, the legal fees that go in handling the divorce and high medical bills can take a toll on the income of even the highly paid person.
Bankruptcy Can Be Filed By Anyone
Unlike popular believe, not all individuals are capable enough to file for the bankruptcy. There are fees and other costs that even this process demands. Your income and assets will be examined, and on that basis, you can decide whether the process is expensive for you or not. You do not want to solve your financial problems by getting into one.
You Lose Everything
Going bankrupt is not synonymous to losing all your possessions. There are limits set by the provinces on the basis of which you can keep certain household furniture, clothing, and health and medical apparatuses under your name. Additionally, you can also keep your vehicle, equipment that help you earn your living, and home, as long as there is no high equity on them, and they are modestly priced. In Canada, you do not have to face mortgage foreclosure either, if you go bankrupt. So you need to know these details to ensure that bankruptcy will be a safer option for you.
Your Credit is Ruined Forever
To be honest, if you are left to consider the option of bankruptcy, then your credit score is already very low. When you file for bankruptcy, you will see an increase in your credit score if it was way lower. However, the credit report may suffer from the blow, but you will be getting the credit card offers in your mail in no time. You will be able to get a secured credit card, which will assist in improving your credit score if you make the payment on time and after about a year, you will be eligible for the regular credit card as well.
Married People Can’t File for Bankruptcy Alone
Do not worry about your spouse if you want to file for bankruptcy while you are married. There is an option to apply for bankruptcy alone. Although information regarding the income of your spouse will be asked in some areas, just to make certain they are not multi-millionaires, they will not be involved in the matter because of you.
So, there you have it, six myths you need to steer clear of before you opt for the bankruptcy alternative.