Myths about Bankruptcy

NOT TRUE. The truth is that you can do almost everything under the NEW law that you could do under the OLD law. In some ways, the new law actually increased the benefits of filing bankruptcy. Call us now to find out more.

Myth 2: Everyone will know you have filed for bankruptcy.

Unless you're a prominent person or a major corporation and the filing is picked up by the media, the chances are very good that the only people who will know about a filing are your creditors and the people whom you tell. While it's true that your bankruptcy is a matter of public record, the number of filings is so great, there is little chance that anyone will even know you filed.

Myth 3: You will lose everything you have.

Nothing could be further from the truth. In fact, most people who file bankruptcy don't lose anything.

Every state has exemptions that protect certain kinds of property. There are exemptions to protect your house, car, truck, household goods and furnishings, IRAs, retirement plans, the cash value in life insurance, wages and more. In those rare situations where you have more property than can be protected by available exemptions, you may be able to retain your property by making payments through a Chapter 13 plan.

Filing bankruptcy does not usually wipe out liens. Therefore, if you want to keep a car, truck, home or business equipment that serves as collateral for a loan, you need to keep paying on the debt. If you make these payments and have exemptions to cover any value above what is owed, you can rest assured you will be able to keep these items.

Myth 4: You will never get credit again.

False! Filing bankruptcy gets rid of debt, and getting rid of debt puts you in a position to handle credit responsibly, and this makes you more attractive to would-be lenders. In fact, unfortunately, it won't be long before you're getting credit card offers again. However, we don't want you to get right back in debt again. At first, lenders will want more money down and will want to charge you higher interest rates. Over time, so long as you pay your bills promptly, your credit will improve. If a client has not re-established good credit in 2 to 4 years, it's not because they filed bankruptcy. It generally means that something else has happened after the bankruptcy to hurt their credit.

Myth 5: Filing bankruptcy will hurt your credit for 10 years.

Not true. Although the bankruptcy is reported on your credit report for up to 10 years, you will be able to re-establish credit good enough to buy a house or car within a relatively short time by managing your finances responsibly after bankruptcy.

Myth 6: If you're married - both you and your spouse have to file for bankruptcy.

Not true. In many cases where both husband and wife have a lot of debt, it makes sense and saves money for them to both file, but it's not a requirement. Additionally, if it makes sense for both spouses to file jointly, they can both file for the price of one filing.

Myth 7: Filing bankruptcy means you're a bad person.

Not true. Over 1,000,000 Americans file bankruptcy each year. Many honest, hard-working people fall on hard times. The bankruptcy laws were created with this in mind, to make sure you have a way to get free from the burden of debt so that you and your family can have a second chance at a "fresh start".

Myth 8: Filing for bankruptcy will hurt your credit.

That's not true. Again, by the time you come to a bankruptcy attorney, your credit is already either messed up or maxed out. Filing bankruptcy can actually help you rebuild your credit. Bankruptcy gets rid of debt and puts you in a better position to improve your finances.

Myth 9: Even if you file for bankruptcy, creditors will still harass you and your family.

This is NOT true. The minute you file bankruptcy, the Court issues an order (The Automatic Stay) telling all of your creditors to leave you alone. No more phone calls. No more collection letters. No more lawsuits. No repossessions. No foreclosures. Nothing. This order has a name. The automatic stay protects you from any and all collection actions. After you file bankruptcy, the creditor is not even allowed to talk to you. In addition, the creditor must stop any collection attempts already started.

The automatic stay is very powerful, and puts the full weight of the United States Courts to work for you, to make sure your creditors leave you alone. If a creditor violates the automatic stay, you have the right to bring the creditor before the Court for Contempt of Court, and to be compensated accordingly. Bankruptcy Court Judges do not take kindly to creditors who ignore the automatic stay, and these Judges have been known to punish creditors severely. Very simply, once you file for bankruptcy, creditors must leave you alone or suffer the consequences.

Myth 10: You can't get rid of back taxes through bankruptcy.

Under the law, there are 3 or 4 qualifications that have to be met to get rid of OLD taxes, that is, over 3 years old. Once met, these taxes are gone. Please note: Filing bankruptcy does NOT get rid of withholding or sales taxes, no matter how old they are. Also, tax liens are not discharged in a Chapter 7 bankruptcy.

Myth 11: You can only file once for bankruptcy protection.

You can only file for a Chapter 7 bankruptcy once every 8 years. For Chapter 13 of the Bankruptcy Code, there is no 8 year restriction. But hopefully, you will never need to file more than one bankruptcy.

Myth 12: You can select which debts and property to list in your bankruptcy.

NO, you can't. Doing so would be against the law. Under the law, when you file bankruptcy, you have to list ALL your property and ALL your debts. Most people want to leave out a debt because it is their intent to keep paying on it. If you want to keep paying on a debt after bankruptcy, you can. After bankruptcy, you can go back and pay anybody you want. In fact, there are some debts you must keep paying on after bankruptcy. If you have a car, truck or house loan, even though you list the debt in your bankruptcy, you must keep paying on the debt if you want to keep the property.