MYTH #1: People who file for bankruptcy don't want to pay their debts.
In fact, the vast majority of people who file for bankruptcy have been trying to pay their debts for years. Most debtors have tried debt consolidation, budgeting, payment plans, and other methods to satisfy all of their creditors. And they have tried these options for years. In my experience, almost EVERYONE wants to meet their obligations. People see themselves as true to their word and obligations and therefore will bend over backwards to pay their debts. Almost every debtor comes to bankruptcy as a "last resort" -- when the pressure is too high or the debt too insurmountable. They have long since paid the price of their spending -- with interest!
MYTH #2: People file for bankruptcy as a result of living an extravagant lifestyle.
This is the most destructive and untrue myth about debt/bankruptcy. The top three causes of bankruptcy are:
Illness and Medical bills
Loss of job
The most common scenario is one where some kind of "financial emergency" forces one to use credit cards or other expensive money (payday loan, Home Equity line of credit, consumer loan, etc.) to cover the emergency. However, once the emergency passes, the high cost of credit (interest and fees) causes the "rob Peter to pay Paul" syndrome. Soon debts are out of control even though the debtor has NOT spent extravagantly at all. This is hardly a scenario in which the debtor can be called "irresponsible."
MYTH #3: Filing for bankruptcy will ruin your credit forever.
Most people who file for bankruptcy relief already have credit scores at the lowest levels. A bankruptcy will do little, if any, to make their score worse. But once a bankruptcy has been filed, the debtor can take steps to quickly improve his credit score by the responsible use of credit. Although it may take a few years before the debtor can borrow again for a car or a house (which he should be very careful about!), this timeline is often far shorter than the one for the hapless debtor paying the minimum payments on several credit cards. A bankruptcy usually makes the road to recovery shorter.
MYTH #4: Filing for bankruptcy is shameful.
It is undeniable that many people will naturally feel ashamed for filing bankruptcy. But is this shame any greater than the shame of being sued? The shame of avoiding your phone and mail? The fear that you feel when you check your bank account? Unquestionably, the emotional toll of dealing with insurmountable debt year upon year can be "soul killing" and far greater than the burden of a bankruptcy. I have personally witnessed divorce, depression, and worse as a result of the debt burden.
In short, people are ashamed about debt/bankruptcy mostly because of falsehoods and unfounded judgments of others. The truth is that most people file for bankruptcy for perfectly honorable reasons (see above). I can assure you that the bankruptcy court will NOT make any ruling about your worth as a human being. You should forgive yourself and let go of the old-fashioned notions you have about debt. Instead, you must eliminate the emotional baggage from your decision-making process when assessing whether a bankruptcy is right for you.
Sometimes, a "fresh start" is just what the doctor ordered.