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Filing for bankruptcy is often misunderstood. Many people delay or avoid the process altogether due to fears fueled by myths and misconceptions. The truth is, bankruptcy can be a powerful tool to help you regain control of your finances and build a better future. In this post, we’ll break down the top 10 myths about bankruptcy and set the record straight to help you make informed decisions.
Myth 1: Bankruptcy Will Ruin My Credit Forever
The Truth: While bankruptcy does impact your credit score initially, it’s not permanent. In fact, many people’s credit scores start improving within 12 to 18 months after filing. Bankruptcy wipes out debt, giving you a fresh start to rebuild your credit responsibly through on-time payments and new credit opportunities like secured credit cards.
Myth 2: I’ll Lose Everything I Own
The Truth: Most people who file for bankruptcy keep most, if not all, of their property. Kentucky’s bankruptcy exemptions allow filers to protect essentials like their home, car, furniture, clothing, and retirement accounts. In Chapter 13 bankruptcy, you can keep all your property while following a repayment plan.
Myth 3: Bankruptcy Means I’ve Failed Financially
The Truth: Bankruptcy isn’t a sign of failure—it’s a legal tool designed to help people in tough financial situations. Unexpected events like job loss, medical bills, or divorce can create financial hardships for anyone. Bankruptcy offers a way to reset, and many successful individuals, from business owners to public figures, have used it to rebuild their lives.
Myth 4: Everyone Will Know I Filed for Bankruptcy
The Truth: While bankruptcy is technically public record, it’s unlikely anyone will know unless they look for it. It’s not advertised or easily searchable by the public. In most cases, the only people who know you filed are your creditors and the court—not your neighbors or friends.
Myth 5: Bankruptcy Discharges All Types of Debt
The Truth: Although bankruptcy can discharge most unsecured debts, like credit cards and medical bills, certain obligations remain. Student loans, child support, alimony, and some tax debts usually aren’t dischargeable. However, Chapter 13 can help reorganize and manage these debts more effectively.
Myth 6: I Can’t File for Bankruptcy if I Have a Job
The Truth: You can file for bankruptcy even if you’re employed. In fact, having a job might make you eligible for Chapter 13 bankruptcy, where you can repay debts over time. Chapter 7 bankruptcy has income limits, but many people still qualify even with steady employment.
Myth 7: Bankruptcy Will Eliminate All My Financial Problems
The Truth: Bankruptcy isn’t a magic solution—it wipes out or restructures your debt, but you’ll still need to manage your finances carefully moving forward. However, with fewer financial burdens, you’ll have a much better chance at building a more stable future. Many clients use bankruptcy as a stepping stone to long-term financial success.
Myth 8: I Can’t File for Bankruptcy Again if I’ve Filed Before
The Truth: You can file for bankruptcy more than once, but there are time limits between filings. For example, you must wait eight years between Chapter 7 filings or two years between Chapter 13 filings. The right attorney can help you understand if and when you’re eligible to file again.
Myth 9: Bankruptcy Will Destroy My Spouse’s Credit
The Truth: If you file for bankruptcy individually, your spouse’s credit score won’t be affected. However, if you share debts (like joint credit cards or loans), those debts will be included in the bankruptcy, and your spouse may still be responsible for them. In some cases, it makes sense for both spouses to file together, but that’s a decision you can make with your attorney.
Myth 10: I Don’t Need a Lawyer to File for Bankruptcy
The Truth: Technically, you can file on your own—but bankruptcy laws are complex and detailed, and filing mistakes can be costly. Missing paperwork or misunderstanding eligibility rules can result in your case being delayed or dismissed. Hiring an experienced attorney ensures that your case is handled correctly, saving you time, stress, and potential legal problems.
Final Thoughts: Don’t Let Myths Hold You Back
If fear and uncertainty are stopping you from filing for bankruptcy, it’s important to separate fact from fiction. Bankruptcy isn’t the end—it’s often the first step toward a fresh financial start. Many of the myths surrounding bankruptcy simply aren’t true, and by working with a knowledgeable attorney, you can navigate the process with confidence.
At Dennery Law, we understand the concerns that come with bankruptcy. We’re here to provide clear answers and compassionate guidance through every step of the process. If you’re struggling with debt and want to explore your options, contact us today for a free consultation.
Let Us Help You Start Fresh
Whether you need Chapter 7 or Chapter 13 bankruptcy, Dennery Law is here to support you with experience, understanding, and a commitment to your financial recovery. Call us or visit our website to schedule your consultation today.