Bankruptcy is a legal process designed to help individuals who have become overwhelmed with debt get a fresh start. However, despite this positive purpose, bankruptcy tends to have many stereotypes, stigmas, and pervasive myths surrounding it. Let’s take a closer look at some of the more common misconceptions about bankruptcy and put the rumors to rest.

Myth #1: Filing for bankruptcy means you’ve failed financially.

Fact: Bankruptcy is a tool for overcoming financial difficulties, not a sign of failure. There are numerous reasons why a person or business might need to file for bankruptcy, from job loss to unexpected medical costs to economic downturn. The bankruptcy process allows people to restructure or eliminate debt and take control of their finances once more.

Myth #2: Bankruptcy will permanently ruin your credit.

Fact: Although bankruptcy does have an impact on your credit score, the effects are non-permanent. Depending on the type of bankruptcy you file for and how well you manage your finances afterward, most individuals can improve their credit scores and regain credit access after a few years.

Myth #3: Filing for bankruptcy means you’ll lose everything you own.

Fact: There are bankruptcy laws in place that help you protect certain assets and avoid having to liquidate everything you own. These laws vary from state to state and sometimes from case to case, so working with a skilled team is essential for maximum protection.

Myth #4: You can only file for bankruptcy once.

Fact: There are limitations to how often you can file for bankruptcy, but it is possible to file more than once per lifetime. Your eligibility will depend on factors such as the length of time since you last filed and what type of bankruptcy you previously filed for.