People don't like to talk about personal debts and bankruptcy. As such, people often struggle when it comes to accurately assessing their options for alleviating financial hardship. This can be especially true when people have misconceptions about bankruptcy and what it means.
For instance, many people assume that filing for bankruptcy protection will effectively wipe out all their debts. This is not exactly true, though, and we explain why in this blog post.
Not all types of bankruptcy are the same
There are options when it comes to the type of bankruptcy for which you might file. Chapter 7, for example, can result in the discharge of all or most of a person's debt. Chapter 13 bankruptcy, on the other hand, allows a filer to reorganize debts and repay them.
In other words, some types of bankruptcy wipe out debt; others do not.
Not all types of debt are eligible for discharge
Many types of debt can be discharged through bankruptcy, including medical debt, personal loans and credit card debt. However, there are also nondischargeable debts, including tax debts, child support obligations and most student loans.
When a person files for bankruptcy, it is not unusual for some types of debt to remain. However, paying these down can be much easier when you are no longer responsible for discharged debts.
Assessing your specific situation
Bankruptcy may or may not be right for your specific needs. Before assuming that it will solve all your problems or that it is too aggressive of an option, you should take the opportunity to discuss your situation with an attorney. With legal guidance, you can make informed decisions on your debt relief options, including bankruptcy.
Misconceptions about bankruptcy can prevent you from accurately assessing your choices. Add in the embarrassment that can come with financial hardship and you can find yourself struggling to get out from under mounting debt.
To avoid this, try to remember that overwhelming debt does not discriminate; it can affect anyone. And don't be afraid to ask for help. The sooner you act, the sooner you can tackle your debt and work toward a better financial future.