Many people see bankruptcy as the catastrophic end of their financial journey. The word itself evokes feelings of shame, failure, and desperation. It’s understandable why someone might view bankruptcy as the absolute last resort, a final option only to be considered when all else fails. That perspective, unfortunately, can create even more severe financial problems. In reality, it should’t be. It should be viewed as a potential stepping stone on the path to financial recovery.
What is Bankruptcy?
Bankruptcy is a legal process guided by federal laws that helps individuals or businesses find relief from overwhelming debt. There are several kinds of bankruptcy, which is why it doesn’t need to be a last resort, but the most common for individuals are Chapter 7 and Chapter 13:
Chapter 7 Bankruptcy
This type of bankruptcy is sometimes called “liquidation bankruptcy.” With guidance from a bankruptcy lawyer in Baton Rouge, you’ll identify eligible assets that can be sold to repay creditors. In return, many of your remaining debts are discharged, providing a fresh start.
Chapter 13 Bankruptcy
This option involves a reorganization of your debt. You work with a bankruptcy attorney in New Orleans and the bankruptcy court on a repayment plan that stretches over 3-5 years. Once you complete the plan, remaining eligible debts are typically discharged.
Busting Top 10 Most Popular Bankruptcy Myths
There are a lot of misconceptions surrounding bankruptcy. Let’s dispel some of the most common ones:
Myth #1: You’ll lose everything you own.
Most people who file bankruptcy are able to protect essential assets. Bankruptcy exemptions exist at both the federal and state level (e.g., Louisiana bankruptcy exemptions), and these are designed to help you keep things like your home, car, retirement funds (within limits), and necessary personal belongings.
Myth #2: Bankruptcy completely wipes away all your debts.
While bankruptcy offers a powerful fresh start, not every kind of debt is dischargeable. Examples of debts that often survive bankruptcy include recent tax debt, student loans (with some exceptions), and child support obligations.
Myth #3: You’ll never be able to get credit again after bankruptcy.
While bankruptcy will certainly impact your credit score, it isn’t the end of your credit journey. You may start receiving credit offers soon after your discharge. By being responsible – paying bills on time, keeping balances low – you can begin to rebuild your credit health over time.
Myth #4: Bankruptcy means you’ve failed financially.
Economic struggles can happen to anyone. Medical bills, job loss, family emergencies, and countless other factors can lead to overwhelming debt. Bankruptcy offers a tool for getting back on track, not a judgment on your character.
Myth #5: Bankruptcy will ruin your chances of getting a job.
In general, employers cannot discriminate based on a past bankruptcy. There are exceptions for some high-security financial positions, but for the vast majority of jobs, bankruptcy won’t affect your eligibility.
Myth #6: Filing bankruptcy is always the best financial option.
While bankruptcy is a powerful tool, it’s not right for everyone, but doesn’t need to be seen as a last resort either. Alternatives like debt negotiation or consolidation might be more suitable in some situations. It’s best to consult with a bankruptcy attorney in Lousiana to weigh all your options.
Myth #7: You can only file bankruptcy once.
There are limitations on how frequently you can file for certain types of bankruptcy. For instance, you usually must wait 8 years between Chapter 7 filings. However, this doesn’t mean you only get one “chance” at bankruptcy.
Myth #8: Married couples must file bankruptcy together.
A spouse can file for bankruptcy individually. Whether it makes sense to file jointly or separately depends on your specific financial circumstances.
Myth #9: You don’t need a lawyer to file for bankruptcy.
Technically you can file on your own, but navigating bankruptcy laws is complex. An experienced bankcuptcy lawyer in Baton Rouge can maximize your benefits, protect your rights, and save you from thinking bankruptcy is a last resort.
Myth #10: Bankruptcy is a complicated, lengthy process.
With the help of a skilled lawyer, the process can be surprisingly smooth and efficient. In many cases, a Chapter 7 bankruptcy can be completed within a few months.
But, remember! Bankruptcy laws in Lousiana are complex and vary from state to state. Seeking personalized legal guidance from a bankruptcy attorney is the best way to make informed decisions about your financial future.
We’re Here to Help
The bankruptcy process can be complex, and laws vary by state. That’s why it’s crucial to have an experienced bankruptcy lawyer on your side. We know Louisiana bankruptcy laws thoroughly and will guide you at each step, helping you understand your options and potential outcomes.
At Diment & Associates, we offer a compassionate, judgment-free space. We’ll assess your financial situation and explain if and how bankruptcy might fit into your pathway to recovery. Don’t wait until it’s your last resort. Contact us to explore your options. Our goal is to help you move from financial hardship to financial security.