Bankruptcy often seems like a distant, mysterious world. When we hear that someone filed for bankruptcy, we automatically feel sympathetic for that person, and assume that they have hit rock bottom. We don’t often know what bankruptcy entails, but we know it has something to do with financial difficulty and that sobers us. Yet when it comes to this financial decision, there are a lot of myths that need to be uncovered. First of all, people who file for bankruptcy are not financially irresponsible. Common assumptions would tell you that those who need bankruptcy protection are those that spend their money too often and fell into debt because of poor choices.

Yet this couldn’t be further from the truth. According to US News, long term unemployment, legal fees associated with divorce, and the cost of running two households after a divorce are just a few of the common reasons that people file for bankruptcy. In April of 2012, about 5.2 million Americans were unemployed and at least 20 percent of all Americans don’t have the funds to pay emergency medical bills when the needs arise. The fact is that most bankruptcies are filed because the filer has a legitimate financial concern, not because he or she is a spendaholic. If you believe that you are falling into debt because of medical bills, legal fees, or unemployment then you are not alone.

Another bankruptcy myth involves discharges. Most of us vaguely recall that bankruptcy can help to discharge debts, but many erroneously assume that this means all your debts will disappear. On the contrary, bankruptcy will only eliminate select dents. For example, you can’t eliminate alimony, spousal support, or child support payments after a divorce, even if you file. You also can’t eliminate student loans yet in a bankruptcy. Thankfully, the Fairness for Struggling Students Act is on the road to eliminate that law, but it has not yet been finalized. While some tax debts can be reduced by bankruptcy, they are often not completely eliminated. In some circumstances, the tax debts will persist. This is especially true if you failed to file a tax return.

Another myth alleges that you can rack up debt before bankruptcy and then get that debt eliminated. Some filers believe that they can hit the malls days before their bankruptcy is finalized, and those debts will suddenly disappear, leaving them with free clothes, appliances, or whatever else they want. This couldn’t be further from the church. That is considered fraud, and any debts that are incurred in fraud are not discharged. In fact, you can be legally prosecuted for racking up debt, especially if you knew that it was illegal when you started spending.

Another bankruptcy misconception has to do with credit. Bankruptcy does not ruin your credit, contrary to popular belief. In fact, in the long run bankruptcy can actually help your credit score to rise again! At the moment, you credit has probably already plummeted because of your debt. By trying to make things right by getting rid of those debts, you are showing the banks that you are taking responsibility for your actions. You’ll start getting credit card offers in the mail again in no time. Once you get a new credit card, you will want to show the company that you are responsible and pay your debts as soon as possible.

The last bankruptcy myth you should stay aware of is that bankruptcy cures all issues. This isn’t true. With responsibility, a bankruptcy may help you to get a debt-free, healthy, fresh start. Yet bankruptcy can’t cure every issue you have. You may need to sacrifice certain spending habits after you file, or sell valuables like property or vehicles so that you can pay your creditors back. You should consider meeting with a financial advisor after you have filed in order to set your life on a good track that will help you to get back into the swing of things. Talk to a bankruptcy attorney today if you need more information about bankruptcy or are considering filing.