If you are facing large debts and repayment is becoming unmanageable, finding a way out can be difficult. Fortunately, there are options available to you. Unfortunately, many people misunderstand how bankruptcy works and what it is for. These misunderstandings can cause people to accidentally make unwise choices.

If you are currently dealing with debt collections and considering bankruptcy, then you need to know how to see through these common myths.

Myth: Bankruptcy always discharges all your debts

Bankruptcy can discharge most of your debts, and for some people, it can discharge all of them. But, there are some nuances. Consider these points:

  • There are different forms of bankruptcy, and some of them require you to pay back a portion of your debts before you are eligible for discharge. Some debts cannot be discharged at all. These include things like criminal restitution, child support and alimony debts, and income tax debts that resulted from fraud.
  • Student loan debts and regular income tax debt generally cannot be discharged, but discharge may be possible for people who fall into very narrow exceptions.
  • It’s always a good idea to discuss all of your debts with your attorney before you file. Even if some of your debts aren’t dischargeable, your attorney can help you develop a plan that gets you back on sound financial footing.

Myth: You can spend all you want before bankruptcy

It is a common belief that since you are headed into bankruptcy anyway, it should be possible to spend with abandon and accrue additional debt prior to filing. The fact is that courts have considered that to be fraud and ruled against discharging debts under those specific conditions as a result.

Myth: Bankruptcy permanently ruins your credit

It takes time to rebuild your credit after bankruptcy, but it is not permanently ruined. In fact, in many cases, the bankruptcy does less damage than leaving the debts unpaid. The more you focus on establishing good financial habits in the future, the faster your credit score will recover.

Myth: Bankruptcy means you’ve failed

Debt happens. It’s hard. Pursuing bankruptcy means you’re being responsible, dealing with the issue and making an effort to get your financial life back on track. You’d be amazed at how good you feel once that fresh start is in your sights.

Filing bankruptcy may feel like a big hurdle, but your attorney will be there with you to guide you through everything. All you have to do is be ready to start.