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Debunking three common myths surrounding bankruptcy

These days you don't have to look far to find someone who is struggling financially. Many people in Alabama and across the nation are experiencing financial difficulties. According to a recent report 1.21 to 1.25 million Americans will file for bankruptcy this year.

There are a lot of misconceptions about bankruptcy. Beginning with the reasons for filing, the process, to the debt that is discharged, many people don't understand. Some people are afraid to claim bankruptcy because of the stigma associated with it.

•· Filing for bankruptcy means you're financially irresponsible

Some believe that overspending with credit cards leads people to bankruptcy. Although this may contribute to debt in certain situations, much of the debt that leads to bankruptcy is caused by unexpected events including a job loss, a serious illness, a divorce, and medical costs.

•· Your credit will be permanently ruined if you file for bankruptcy

After filing bankruptcy, people are often advised to open a secured credit card which allows limited spending. This gives the card user an opportunity to start small in rebuilding credit. Generally within around 12 months a regular card can be obtained and within several years some people even qualify for a mortgage.

•· Bankruptcy discharges all past debts

There are certain debts that are not discharged in a bankruptcy including child support payments, restitution for a crime, and student loan debt. In addition, it's considered fraud to charge up credit cards before filing bankruptcy.

Bankruptcy is an option for certain qualifying individuals who want to work toward a debt-free future. However, it's not for everyone. An experienced bankruptcy attorney can help you decide what's best for you.

Source: US News & World Report, "5 Bankruptcy Myths Debunked," Susan Johnston, May 14, 2012

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