According to the Federal Reserve Bank of New York, it is estimated that a surprisingly large percentage of the population is deemed as “financially solvent”, or “broke”. It is estimated that almost 15% of Americans owe more in debt than have in valued assets. As the economy continues its bumpy journey and the pandemic wages on, these numbers are sure to rise. So why, then, does only an estimated 1% of the population file for bankruptcy when clearly millions are suffering in financial fragility?
Myths and Misconceptions
Bankruptcy has long been presumed to be punishment of which hard working Americans would never find themselves experiencing. Most people assume that bankruptcy results from being lazy, or financially irresponsible. To be insolvent must mean that somehow a person could have made better choices, lived within their means, or worked harder. False.
The truth is, financial problems can strike anyone at anytime. Divorce or death of a spouse can be one reason someone finds themselves in a financial disaster. For others, it could be the loss of a job or medical reasons for their downfall into poverty. The bottom line is, unfortunately, many hard working people find themselves in the weeds financially through no fault of their own. It is these types of misconceptions that paint the wrong picture of the financial freedom bankruptcy can offer. Further, these misconceptions can prevent people from seeking help before it is too late or even afterwards, when their options are more limited.
Bankruptcy has also carried with it the false notion that once you file for bankruptcy, you will be barred from securing credit again in the future. Most people know that a bankruptcy will stay marked in their credit score profile for up to seven years; and may assume that is a barrier for future loans. False.
While a bankruptcy is noted in your credit profile for up to seven years, but most people find their credit score improves after a bankruptcy. This is because the heaviest weight that drags down a credit score are high credit balances, missed or inconsistent payments, and higher debt to income ratio. Having debts discharged through a Chapter 7 or 13 bankruptcy, wipes away high balances and debt to income ratios; essentially providing a clean slate to rebuild.
Don’t let misconceptions and misinformation prevent you from obtaining financial freedom. If you are suffering in debt or financial instability, consult with a Dallas bankruptcy attorney today to discuss your options for debt relief.