Figuring out whether to file for bankruptcy and how to try to put the system to use for you can be challenging. Before you get too far into it, it's a good idea to think a bit about how a bankruptcy lawyer might encourage you to go about things. Let's look at some of the myths that a bankruptcy attorney may have to address with a client.

Debts Don't Just Go Away

There's a pervasive cultural notion that bankruptcy makes debts go poof. Nothing could be further from the truth. The goal of the bankruptcy system is to give you as good a chance as possible at restoring your financial footing.

In some cases, that does actually entail retiring a significant portion of your debts. The process, however, is designed to discourage folks from pursuing bankruptcy proceedings just to get out of paying.

The version of bankruptcy that retires debts, Chapter 7, allows the court to liquidate a large portion of your current assets. The sale of these items is then used to pay off as much of your debts as possible. It's common for the court to take into consideration your bare-minimum needs, such as having a vehicle to get to work. If you have, for example, a sports cars and a sedan, the court may order you to sell the pricier vehicle to settle debts and leave you with the more practical daily driver.

Bankruptcy Makes Creditors Disappear

Creditor harassment can be stopped by an immediate stay from a court. The concerns of creditors, though, are not invalidated by this. Instead, creditors must either discuss their problems with the court or your counsel. This can minimize harassing phone calls and demanding letters, but it doesn't mean that your creditors are gone entirely.

It's the End of Your Business and Finances

Shutting down a business following bankruptcy is certainly an option. Similarly, you absolutely can decide to cease engaging in financial relationships with lending institutions in your personal life, too. Those aren't the only two choices, fortunately.

Chapter 11 bankruptcy is frequently used by businesses restructure their debts and survive. Creditors might take haircuts on what they're owed, but they often end up recovering most of the account. The idea behind Chapter 13 is similar, but it is instead applied to personal finances. Most cases take three to 5 years, and the goal is to get back on your feet.