For most people, bankruptcy feels like an extreme solution to debt. However, it may not necessarily be an extreme move in many cases. Filing for bankruptcy does not mean that a person is irresponsible.
According to U.S. News, there are various reasons a person may need to file for bankruptcy and many of those reasons are valid.
Only irresponsible people file bankruptcy
Many people become ashamed after filing for bankruptcy. They may feel as though only irresponsible people file. The reality is that anyone can have financial hardship. Job loss, medical care, divorce and many other factors can eat up your income and lead to outstanding debt. Bankruptcy is not something to feel shame over. It is a helpful tool for debt relief.
Bankruptcy destroys a person’s credit.
While true that bankruptcy stays on your credit report for 10 years, it does not affect you forever. The impact on your score begins to diminish long before the removal. After bankruptcy, many people can qualify for a mortgage within two to three years. After bankruptcy, it takes about six to 12 months to apply for a regular credit card, but you can apply for secure cards before that period.
Bankruptcy eliminates all debt.
Some people believe bankruptcy discharges all debt. While bankruptcy can help various types of debt, it cannot discharge alimony or child support and cannot generally discharge student loan debts. You can reduce tax debts in some cases, but criminal fines do not discharge during bankruptcy.
Do not spend your money on luxury goods before filing if you plan to file bankruptcy. This may be presumptive fraud.