If you are like many Americans, you may view bankruptcy as an absolute last resort. From feelings of personal failure to anxiety over losing your home or car, fear may keep you from even considering the option.
In fact, financial analysts have found that only a fraction of U.S. households who may benefit from bankruptcy choose to do so. For many, myths about the bankruptcy process may prevent them from seeking help.
1. Filing for bankruptcy is a sign of failure
While being financially irresponsible sometimes leads to bankruptcy, most bankruptcies in the U.S. result from unexpected and unpreventable events. From overwhelming medical bills, job loss or divorce to caring for a loved one, there are many reasons otherwise responsible people may need financial relief.
2. You will lose important assets
Federal and Texas state law protects many types of assets during bankruptcy through property exemptions. In addition to your house or vehicle, these exemptions may allow you to keep personal property like home furnishings, jewelry, professional tools and family heirlooms.
3. Your credit score will never recover
While bankruptcy may remain on your credit report for several years, filing may give you the clean slate you need to build and maintain healthy credit going forward. A recent report by the Consumer Financial Protection Bureau found that most people who filed managed to steadily increase their credit score in the years following bankruptcy.
Too often families continue to struggle with debt only to fall further behind. If you have overwhelming financial obligations, either Chapter 7 or Chapter 13 bankruptcy may help you to find a better path forward.