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When we were younger and first learning about how money works, most of us were taught that a bankruptcy declaration was the worst thing that we could ever do. Bankruptcy was akin to declaring yourself a total loser and resigning yourself to living in a cave, off the grid, and never interacting with regular society ever again. We grew up believing that bankruptcy would keep us from ever achieving financial success. Pretty much everything we learned about bankruptcy is wrong. Here is the truth behind some of those myths we were all taught as kids.

Bankruptcy Only Happens to Bad People

Wow is this super false. Bankruptcy can happen to anybody. Even people who are very wealthy might need to declare bankruptcy.

Bankruptcy Ruins Your Credit Forever

Not true! According to Doan Law, a San Diego bankruptcy lawyer firm, bankruptcy can actually improve your credit. And, there are specific steps the recently declared can take to repair their credit records to make them look shiny and pretty again. That said, you can’t erase a bankruptcy declaration right away–it will stick around on your credit report for a few years.

You Only Get to Declare Bankruptcy Once

Nope. That said, it is true that it’s not a good idea to get into the habit of declaring bankruptcy simply because you don’t want to pay your bills. Remember: bankruptcy stays on your credit history for a few years and while a single instance is forgivable by most creditors, landlords, and the court, if you have a bunch of bankruptcies on your record, that is a huge red flag for anybody who will be working with you financially.

Bankruptcy Is Only for Credit Cards

Wrong again! Bankruptcy can “wipe out” almost any expense. It is most commonly used to free a person from overwhelming medical-related debts (like massive hospital bills after a trip to the ER). It can also be used to free you from a mortgage on a house you no longer live in or a loan on a car that you can no longer drive. It can be used on personal loans, payday loans, instalment loans, etc. There are a few things that cannot be erased with a bankruptcy: child support and alimony payments aren’t dischargeable. Neither are student loans or income tax debts.

Bankruptcy is Public Information

This is technically true: your declaration of bankruptcy will be a part of the public record. And there is often a small ad taken out in the paper to allow your creditors to challenge your petition (but it’s only up for a few days). That said–unless someone actively goes looking for this record and they’re willing to dig pretty deep to find it–the only people who will know about your bankruptcy are you, your creditors, your lawyer, and the judge who presides over your case. You know, unless you decide to tell someone.

Bankruptcy is a Last Resort

For most of us, this still feels true. This does not mean, however, that you have to mire yourself in financial disaster before you file. For example, there are some debts that you will know right away whether or not you can afford to pay. Remember those huge medical bills we talked about earlier? Once you see the final number, one of the best things you can do for yourself is meet with a bankruptcy lawyer. But, a lot of the time you want to avoid bankruptcy for as long as possible and use one of the other methods of dealing with debt instead.

Bankruptcy is Expensive

Bankruptcy often gets a bad reputation for being expensive but, in reality, it can be accomplished with just a few hundred dollars at most. People think it costs more than that because they know that lawyers are expensive and that court filing costs can get spendy very quickly. Most attorneys, however, have special deals in place to help people who are in dire financial situations. Depending on your situation, you might also be able to find a bankruptcy professional via your state’s bar association or at legal aid. Some people might even help you pro bono.

You Have to Hire a Lawyer to Declare Bankruptcy

It is absolutely in your best interests to hire an attorney who has experience with bankruptcy claims. That much is true. It is also true that it is, technically speaking, possible to handle bankruptcy on your own. You are allowed to file your own paperwork and to represent yourself in court. More often than not, however, trying to DiY it ends up costing you more than you’d spend hiring a professional to help you.

Bankruptcy has changed since we were young. Today it is no longer the negative life ruiner that we grew up believing it to be.

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