In Utah, bankruptcy has developed a bad reputation, based on a variety of misconceptions and misunderstandings.
Many financially challenged individuals who could use the relief of a discharge are fearful of filing because of what they have heard. But these myths are just that — fiction.
Myth #1: Bankruptcy Is Your Fault
Maybe you’ve been told that bankruptcy is only for deadbeats and losers. Or that if you need to file, it must be because of something you did wrong, or because you were financially irresponsible.
These common indictments are unfortunate.
Most people who file for bankruptcy do so after a life-changing experience that’s beyond their control. Divorce, for example, can lead to bankruptcy due to the legal bills and the costs of running two households.
A serious illness resulting in excessive medical bills also can compel a filing. In other cases, long-term unemployment may result in insurmountable debt that threatens your ability to remain in your home.
Whatever the reasons, bankruptcy is a legally available option for anyone struggling to make ends meet. Most of our clients file because they have no other choice, not because they want an easy way out of a problem they brought on themselves.
Myth #2: Bankruptcy Ruins Your Credit
You may believe that once you file for bankruptcy, you’ll never be able to get consumer credit again. That couldn’t be further from the truth.
Soon after your bankruptcy discharge — probably within a month or two — you’ll start getting credit card offers in the mail. These offers are typically for secured cards that require a bank deposit for funding. And they are often from subprime lenders charging high interest rates.
But if you obtain a secured credit card and make regular, on-time payments for 12 to 18 months, your credit will steadily recover. In fact, if you carry a modest balance and are obsessive about making your payments on time, you may soon be able to get a real credit card with lower interest.
As long as you continue to keep up with all of your bills and credit cards, you can rebuild a solid credit score. The bankruptcy will remain on your credit report for up to 10 years, depending on your chapter filing. But with a sincere and diligent effort, your credit score could end up even better after discharge than it was before you ran into trouble.
Myth #3: You’ll Lose Everything You Own When You File for Bankruptcy
Contrary to what you may have heard, you won’t automatically lose all of your assets when you file for bankruptcy. In fact, specific exemptions allow filers to keep most of their possessions.
In Utah, up to $30,000 of the equity in your primary residence will be protected through the homestead exemption. And the motor vehicle exemption will cover up to $5,000 in equity for one vehicle.
You must consult with a bankruptcy attorney to be sure, but most filers do not lose their home or vehicle. And they are permitted to keep their household belongings as well.
Don’t let misinformation stop you from filing bankruptcy.
If you’re struggling to pay bills and falling further behind every month, filing could provide you with the solution you need. To learn whether this may be an option for you, schedule a complimentary consultation with the experienced bankruptcy attorneys at Lewis Adams & Associates.
Contact our convenient West Jordan office location today to learn more about how filing for bankruptcy can help you make a fresh start.