Common Misconceptions about the Bankruptcy Process
Interviewer: What are some of the misconceptions you find among your clients regarding the bankruptcy process?
You Will Not Go to Jail for Non-Payment of Debt
Tanya: I think some people think that they’re going to go to jail for nonpayment of debt. That doesn’t happen. I think many people don’t know their own finances. I find that a number of people that end up in bankruptcy don’t understand basic finances.
Many People Do Not Have a Thorough Knowledge of Basic Finances
I’ll ask a question, such as how much equity is in your house and they don’t even ever consider what their house is worth versus what is owed on it. What they know is what their monthly payment is. Interestingly, I think a lot of the people that file for bankruptcy, maybe were not properly educated in terms of debt and savings.
When they get credit, whether it’s a credit card or a house, they’re just assuming they’re entitled to it or they’re assuming they should take it because it’s being offered to them; therefore, they can afford to pay for it.
Interviewer: You’re putting your trust in the financial institution. They wouldn’t have offered this to you if they thought you couldn’t afford it.
Attorney Helfand Advises Using Credit with Restraint and Not before You Have a Comprehensive Knowledge of Your Financial Obligations
Tanya: You must know your own limits and make your own budget. You need to figure out yourself what your lifestyle is and what your obligations are. Just because somebody offers you a huge line of credit it doesn’t mean you can afford it or you should take it.
I think a lot of people unfortunately are not financially responsible and I think the schools really need to have a class in this. There are just some basic financial common sense practices that people just don’t know.
Filing for Bankruptcy Will Eventually Restore Your Credit, Not Ruin It Permanently
Interviewer: Right, I agree. Are there any other misconceptions people have about bankruptcy?
Tanya: People assume that their credit will be ruined forever. Whereas again, with that 720 credit plan, within two years you can bring it right back. There are techniques to bring it right back. People should not assume that they will never get a house again or get a car again. No, those are misconceptions. If you have a decent job and again you budget yourself properly, you will still get a car. You will still be able to buy a house afterwards.