No one should declare bankruptcy without giving the decision plenty of thought and speaking to a professional before taking the plunge. However, it’s widely known that, sometimes, bankruptcy is absolutely the right thing to do. While it will always come with some negative consequences, there are definitely situations where it’s your best bet. With this article, though, we want to examine some reasons that don’t justify bankruptcy, despite what you may have heard.
First, one major misconception about declaring bankruptcy is that it will strip liens from your property. But that’s not the case for secured liens where the debt is backed by physical property like your home. That means that while declaring bankruptcy may free you of the debt, the lien still exists on your home meaning the creditor could still repossess it.
If one of your major financial issues is child support and/or alimony, declaring bankruptcy won’t do anything to help you in that regard. These debts will always need to be paid in full. In fact, if you file a chapter 13 bankruptcy, your plan will specifically call for the complete payment of any debts related to child support or alimony.
For the most part, you should also plan on paying your student loans back in full as well. The only time your bankruptcy will help you with student loans is if you can prove that it would cause you “undue hardship” to pay them back. Unfortunately, this is almost next to impossible to do. Not only would you have to show that you cannot possibly pay them now, but that there is no chance of you doing so in the near future.
So although there are plenty of occasions where getting rid of debt through bankruptcy makes sense, be sure to think it through. Consulting with a professional will help clear up any further misconceptions you may be operating under.