4 common myths about filing bankruptcy in Connecticut

Many myths surround consumer bankruptcy and those considering filing should be aware of what they are.

Many people in Connecticut find themselves struggling with extensive amounts of debt due to job loss, divorce, medical problems or a variety of other situations. Although many people can benefit from the consumer bankruptcy process, many avoid taking the steps necessary to file because they have heard false information about what bankruptcy entails. Here are some of the most common myths surrounding consumer bankruptcy and why they are not true.

1. Bankruptcy eliminates all debts

Bankruptcy is designed to help people in debt start over financially. However, several types of debt are not discharged during this process. For example, restitution owed because of a crime and domestic support obligations, like alimony and child support, cannot be eliminated when bankruptcy is filed.

It is also important to remember that spending without abandon before the bankruptcy filing process does not mean that these debts will be discharged. In many cases, this is viewed as a form of fraud, and courts generally do not discharge debts that are incurred due to fraudulent activities.

2. Only the financially irresponsible file bankruptcy

A common stigma exists that makes it seem like only those who cannot manage their money need to file for bankruptcy. However, filing bankruptcy is far from a personal failing, and many people end up needing to file bankruptcy because of medical debt and other unfortunate circumstances. People should view bankruptcy as a tool to get back on track financially rather than a sign of personal failure.

3. Bankruptcy permanently ruins credit

Those who file bankruptcy should expect to pay higher interest rates and have limited access to lines of credit for as long as bankruptcy remains on their credit report, which is usually seven to 10 years. Although there are repercussions that come with filing, those who go through the bankruptcy process may find that their credit score starts to improve shortly after they finish filing.

4. Paying off debt is always the better option

Some believe that paying off debts in full is always better than moving forward with the bankruptcy process. However, bankruptcy is often the better option for those who have debts that take up more than half of their annual income and they cannot pay off within a five-year period.

Reach out to an attorney

Those who are burdened by debt in Connecticut may find that bankruptcy is the best way for them to ensure a healthy financial future. In this situation, potential filers should contact an attorney in their area to discuss whether or not filing bankruptcy is their best option.