With the New Year upon us, many people are setting aside time to reflect on their personal and economic circumstances. Unfortunately, many people who ultimately find themselves to be in poor financial health often refuse to consider the financial lifeline offered by either Chapter 7 or Chapter 13 bankruptcy.

The reason?

Simply put, they are afraid to file for bankruptcy due to certain myths about its financial/social consequences or because they don't fully understand the process.

Today's post -- the first in a series -- will attempt to debunk five common myths associated with bankruptcy.

If you file for bankruptcy, everyone will know.

Bankruptcy is a matter of public record. However, you must remember that you are not the only one filing. Hundreds -- perhaps thousands -- of people are filing at any given time.

The publications that typically print this sort of information likely have no interest in you, and are only looking for bankruptcy filings involving notable figures or businesses.

If you file for Chapter 7 bankruptcy, all of your debts will be completely eliminated.

Not true. A more accurate statement would be "If you file for Chapter 7 bankruptcy, most of your debts will be completely eliminated."

You will still have to make child support and spousal support payments, student loan payments, and payments associated with any legal judgments/settlements.

If you file for bankruptcy, you will lose all of your possessions.

Not true. The United States Bankruptcy Code, as well as many state laws expressly allow people filing for bankruptcy to keep "exempt" property such as your home, car, household furnishings, retirement accounts and clothes.

If you file for bankruptcy, you will never be able to secure a credit card.

Not true. Filing for bankruptcy will not necessarily result in bad credit or prevent you from securing a line of credit.

In fact, you will probably be able to obtain some level of unsecured credit (meaning a "regular" credit card) post-bankruptcy. However, in the event you are unable to obtain a line of unsecured credit relatively soon, you still have the option of a secured credit card.

If you file for bankruptcy, your spouse must also file.

This is not altogether true. If a spouse has a significant amount of debt in their name only, then they may consider filing for bankruptcy on their own. However, if the debt is held jointly, it may make more sense for the couple to file for bankruptcy.

To be continued ...

Remember, virtually anyone can experience financial problems due to circumstances beyond their control. Regardless of your financial situation, contact an experienced legal professional to learn more about your rights and your options under Chapter 7 bankruptcy or Chapter 13 bankruptcy.

This post is for informational purposes only and is not to be construed as legal advice.

Source:

MSN Money, "12 Myths About Bankruptcy" November 17, 2011