The myths associated with when bankruptcy should be filed, what happens after and the ease of filing can confuse those who are in need of financial relief.



Filing for bankruptcy is fairly common in Tennessee. In fact, the Times Free Press says that the state’s rate of filings was twice that of the national average in a single calendar year. For every 1,000 state residents, 5.73 file for bankruptcy in a given year, but only 2.63 per 1,000 file across the country in the same time frame. Even though this legal action is common, some people still do not completely understand the process. Whether this misunderstanding is positive or negative, it can lead to perils for the filer.

Myth: It is a last-ditch effort.

Everyone who files needs to know exactly what they are getting into before they sign the papers, but that does not mean that all other avenues need to be exhausted or bankruptcy should be used as some hail-Mary effort to relieve debt. Some people think they have to try to pay off their debts rather than filing because they see this legal action as something that is inherently bad. However, this legal process can help alleviate the stresses that high amounts of debt can cause. According to NerdWallet, if a person’s debt is equal to or greater than 50 percent of his or her income, bankruptcy may be the best option.

Myth: There is no chance of rebuilding credit.

While it might take some patience, a person’s credit can be rebuilt after a bankruptcy. Some people think this is impossible because this perceived financial ruin can lead to the availability of fewer credit options and higher interest rates on the few loans that are accessible. However, a person’s credit score can actually get better in as few was six months after the finalization of personal liquidation. After filing, someone may be able to rebuild credit through certain loan options, such as the following:

• Get a friend or family member to co-sign a loan.
• Borrow money contingent on pre-made payments or a down payment through a secured loan.
• Get a line of credit backed by a deposit through a secured credit card.

These financial options will help borrowers improve their credit history so long as they continue to make payments on time.

Myth: It is as easy as filling out forms.

The information placed in a bankruptcy petition is on a common form and therefore some think it’s an easy task. Nothing is further than the truth. That thinking is like saying writing a song is just a matter of putting dots and lines on a musical staff. The deception is that knowing what information to put on the form is deceptively complicated. In fact even among attorneys, very few are Board Certified Specialists in Bankruptcy law. Many Bankruptcy Debtors get into deep trouble for errors made in their Bankruptcy documents. The responsibility falls on the Debtor with unexpected loss of a house or car, loss of their discharge (debt forgiveness), or even criminal fines or imprisonment. Both a Chapter 7 and 13 have legal implications that can affect a filer for seven to 10 years. Filing may require litigation, which could lead to serious legal implications if the filer does not have grounds for bankruptcy.

Even though bankruptcy is often misunderstood, it can be the best option for residents in Tennessee, so long as the proceedings are understood. Before anyone files the papers to start the legal process, a Board Certified Consumer Bankruptcy Specialist attorney who is knowledgeable should be consulted to ensure there is a complete understanding of the ramifications of bankruptcy.