The answer is no. Many people believe you need to have hit rock bottom financially to file for bankruptcy. This is not always true. Bankruptcy is for anyone struggling with debt, regardless of their financial situation.
You do not have to be penniless to seek help
There is no specific requirement to be completely broke to file for bankruptcy. The law provides different types of bankruptcy for various financial circumstances, of which the two most common are Chapter 7 and Chapter 13:
- Chapter 7 bankruptcy: You can eliminate most debts with this chapter by selling some assets to pay creditors. Maryland has specific exemptions that let you keep certain property, like your home, car and personal belongings.
- Chapter 13 bankruptcy: This option lets you develop a plan to settle your debts over three to five years. You can also keep your assets while making manageable payments to your creditors.
Chapter 7 bankruptcy eligibility requires passing the means test that assesses your ability to repay debts. If you do not pass the means test, Chapter 13 bankruptcy might still be your option.
Misconceptions about bankruptcy are harmful
Believing in this myth and other misconceptions about bankruptcy can be damaging. It can delay individuals from obtaining necessary help, leading to increased stress and financial instability. Waiting until you are entirely out of money can make recovering and rebuilding your financial health more difficult.
In reality, early intervention through bankruptcy can stop creditor harassment, prevent wage garnishment and give you a structured plan to address your debts. When you are ready to have a fresh financial start, make sure to work with a lawyer who can guide you throughout this journey.