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Why do some people fear bankruptcy?

On Behalf of | May 11, 2023 | Bankruptcy And Debt Relief

For some people, the term “bankruptcy” is one of the scariest words in the dictionary. Bankruptcy allows businesses and consumers to manage their debts through a court proceeding.

Since many individuals fear bankruptcy, they do everything possible to avoid it. Below are common reasons why some people are afraid of it, even though they likely shouldn’t be.

They fear it will ruin their credit

Bankruptcy stays on one’s credit report for seven to 10 years. As a result, someone might assume that their credit is forever ruined. However, the impact of this filing will lessen over time. Responsible habits moving forward will repair a dinged score quickly.

They don’t want to appear financially irresponsible

A common misconception about bankruptcy is that those who request this form of debt relief are poor money managers. Though that’s true in some situations, but financial irresponsibility isn’t a factor in most bankruptcies. Most filers struggle due to medical challenges, job loss, economic downturn and other factors beyond their control.

They’re afraid they will lose all of their property

Many people fear that if they file for bankruptcy — especially Chapter 7 bankruptcy — they’ll lose their possessions. In reality, due to exemptions and the discretion exercised by trustees, only a tiny fraction of filers lose any of their assets whatsoever.

They fear bankruptcy will hold them back

Some individuals dream of buying a car or home, but they fear bankruptcy will hinder their aspirations. However, bankruptcy can aid them in pursuing their goals by offering meaningful relief that can allow them to build a brighter financial future.

No one should let the stigma of bankruptcy prevent them from getting help handling their finances. Seeking legal guidance can help to dispel myths and allow debtors to make informed decisions about their options.