Bankruptcy Myths

Men and women are worried when it comes to filing for bankruptcy because of horror stories they may have heard about the bankruptcy process. A majority of time, these stories are just myths. Here are some of the biggest myths.
 
Bankruptcy causes shame. Bankruptcy does not cause shame; it is a tool to help people when they need it. Famous people and companies have filed for bankruptcy, including Francis Ford Coppola, Henry Ford, and General Motors.

People lose everything in bankruptcy. Television and movies make it seem like people need to sell everything during bankruptcy, but this is not true. Current bankruptcy cases involve people in debt who have few eligible assets. Today, the only thing people lose is their credit score.

Credit is destroyed through bankruptcy. While bankruptcy will affect your credit, it is not for the long term. If people maintain wise spending habits after bankruptcy, they can rebuild their credit score.

Bankruptcy requires a lot of debt. The total sum of debt an individual carries is not very important. What is important is if the individual has the sufficient monthly income necessary to pay it off.

Bankruptcy causes people to lose their home. The truth of this popularly accepted myth is that individuals only lose their home if they have a large sum of debt and a lot of equity resting on their home. In a majority of states, Florida included, there are rules in place, such as automatic stays, to protect the home. Bankruptcy will not clear mortgage debt but they will make it much more manageable so people can keep their home.