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Uncovering the myths of bankruptcy

On Behalf of | Apr 1, 2016 | Chapter 7

Despite the best efforts of Oregon bankruptcy attorneys and lawmakers, many myths continue to circulate about bankruptcy and the effect it can have on a person’s life. While many myths can be harmless, those regarding bankruptcy can be extremely damaging to someone’s financial health if they go into a bankruptcy believing one thing and something altogether different results. The same is true if they avoid a bankruptcy for the same reasons.

In chapter 7 bankruptcy, a person’s assets are given to a trustee and sold to pay the debts held against them. Some people may mistakenly believe that this fully discharges all the debts they have. Unfortunately, many debts are not dischargeable under Oregon’s laws, including child support, criminal restitution payments, and in many cases, student loans.

Other people may believe that filing for bankruptcy will automatically ruin their credit for decades. According to US News, in as little as six months filers can start to rebuild their credit, usually with secured credit cards. After a year, they may be able to move on to regular credit cards. As long as they continue to make payments on time and use an appropriate amount of credit, they will continue to improve their credit scores.

Sadly, Fox Business reports that many people still believe there is a stigma involved with bankruptcy. While this may have been true 10 years ago, the number of families struggling in the economic downturn has helped many people understand that bankruptcy is a necessary tool that can help bring families out of a bad financial situation. While some people may still hold the same old opinions about filing for bankruptcy, they are far fewer in number today than they have ever been in the past. 

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The Law Office of Kim Covington is a debt relief agency, and I have helped families, individuals and small businesses, file for bankruptcy relief under the U.S. Bankruptcy Code, for over 23 years.