Bankruptcy Myths Part 1

Most people’s image of a declared bankrupt is someone who has lost all his money and on the verge of sleeping on the streets. That is so stereotypical and completely untrue. Of course, if you are a bum in the street, you are a bankrupt but if you are a bankrupt you do not have to be a bum in the street.

Confused?

Don’t be, because I am going to dispel the 14 most common myths about bankruptcy once and for all.

Myth #1 – “I will never be credit worthy again”

The truth is that although your credit rating will show that you are a bankrupt for 7 to 10 years, you can still obtain credit within that period of time, often in as little as 18 months from the time you have been declared a bankrupt.

All you need to do is to show that you can maintain a good credit record by paying all your dues on time. One simple way of doing this is by obtaining a secured credit card and making sure you pay off all its outstanding balance every month. But avoid applying for secured credit cards with a high annual fee or interest rate and that do not provide the option of converting into an unsecured one after 18 months or so of a good payment record. And if you have any existing loans you are still paying off, be sure you keep up with the repayments every month.

By doing so, you will be able to secure credit again soon after your discharge.

Myth #2 – “My bankruptcy will become public knowledge”

The fact is bankruptcy will not remove the shirt off your back and leave you destitute. In fact, bankruptcy makes you avoid such a disaster. Therefore, on the face of it nothing will change in your circumstances, therefore no one other than your lawyer, the court and your creditors will know you are a bankrupt.

Myth #3 – “Bankruptcy will take away everything I own”

If you think a bankrupt is a beggar on the street, get rid of that picture in your mind. As stated above, the opposite is true. Bankruptcy protects you from the constant harassment of creditors and their actions that would otherwise lead to you losing everything. However, bankruptcy does not remove your obligations to service your loans. You still have to repay your creditors. But you can do so from a position where you are more in control as the amount of repayment is determined by the court, not the creditors.