Monday, April 20, 2009

Myths and Facts about Personal Bankruptcy



Written by: Keun H. Maeng

The obligation to file a bankruptcy is not always an event that gradually occurs. It can spontaneously happen to anyone from unexpected catastrophes such as natural disasters, medical expenses, and job loss. Filing bankruptcy can be extremely stressful. Therefore, it is very important to clearly distinguish between the myths and facts about personal bankruptcy before filing for an actual one.

There is a myth that filing for personal bankruptcy by law is prohibited. Obviously, this is a misconception. In 2005, U.S. Congress made changes that allowed any debtor to file for personal bankruptcy. This is governed by state laws, which determines whether the person is eligible to liquidate his or her assets.

People worry that filing bankruptcy is degrading. This misconception is again a myth. Filing bankruptcy is indeed something that you’re not very proud of. However, this is far much less embarrassing than getting chased by creditors by calls or by door. Filing bankruptcy wipes out your previous credit record. In essence, it can be a new start to your financial growth. Therefore, considering bankruptcy as a lesson is a better interpretation than embarrassment.

Another myth people believe is that once you file bankruptcy, his or her credit score will always be bad. This isn’t always true. Even though once you do file bankruptcy, your credit score would be poor, but once your file is discharged, your previous credit score will not be the same.

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