Many Americans may have considered but not filed for bankruptcy

Arizona residents may be interested to hear that, according to a recent survey from YouGov, a quarter of all Americans have considered filing for bankruptcy. Of those who are considering filing for bankruptcy, however, about one in five Americans has actually filed. Despite the fact that a quarter of those surveyed perceive bankruptcy as "shameful," the prospect of a fresh start seems to have counterbalanced that sense of shame for 55 percent of those surveyed.

However, that fresh start may not be as clean a break as most people believe. Many respondents did not know that income taxes and alimony cannot be discharged through Chapter 7 bankruptcy, which is the most common form of bankruptcy filed in country. Also, about 31 percent of those surveyed were not aware that student loan debt usually could not be discharged. In most cases, only debts such as credit card debt, medical debt and auto loans can be completely wiped away through bankruptcy.

There was also a lack of understanding of what a bankruptcy can do to one's credit history. A large percentage of those surveyed were not aware that a Chapter 7 bankruptcy filing would stay on their credit report for up to a decade. Fortunately, a large majority of people did understand that filing for bankruptcy would have a negative impact on their credit score and ability to get a loan.

Individuals who have considered filing bankruptcy may have a number of questions regarding the process and how it affects their financial status. Those individuals may benefit from working with an attorney familiar with bankruptcy. That attorney might be able to discuss the scope and benefits of filing for Chapter 7 for each client and clear up any common misconceptions about the process.

Source: MainStreet, "One-Quarter of Americans have Considered Filing for Bankruptcy", Hal Bundrick, February 26, 2014

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