The unfortunate reality when it comes to the law is that there are quite a few misconceptions among the public. While many of these misconceptions are relatively innocuous, there are others that can actually prove to be rather harmful.
This is especially true in the area of bankruptcy law, where otherwise financially troubled people often actively avoid the fresh start offered by Chapter 7 and Chapter 13 due to popular misconceptions about things like credit scores, and the availability of credit and financing options.
In recognition of this reality, it's important to highlight those studies and publications that can help debunk some of these popular misconceptions.
For instance, consider the findings of a recent report by the Federal Reserve Bank of New York comparing the experiences of two separate groups of people: financially troubled individuals who filed for bankruptcy and financially troubled individuals who opted attempted to repay debt rather than file for bankruptcy.
Some of the more notable findings of the FRBNY study included:
- Those who sought bankruptcy protection had significantly more access to credit than their counterparts in the study.
- Those who sought bankruptcy protection saw a much faster recovery in their credit scores than their counterparts in the study.
To this last point, experts indicate that those who file for bankruptcy will typically see offers for credit cards, car financing and even mortgages fill their mailboxes within only a few years.
Here's hoping that we continue to see more studies like these, as they can not only help debunk potentially harmful myths about the bankruptcy process, but encourage more people to consider the benefits of Chapter 7 or Chapter 13 sooner than later.
Source: Fox Business, "How avoiding bankruptcy can backfire," Steve Rhode, March 2, 2015