Top 10 Bankruptcy Myths and Misconceptions
1. Everyone will know you have filed for bankruptcy.
Unless you are 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 that will know about the filing are your creditors and those you tell. While it's true that your filing is a matter of public record, the number of filings is so massive that, unless someone is specifically trying to track down information on you, there is almost no chance that anyone will ever know you filed. People love to gossip, so if you don't want everyone you know to know that you filed, keep it to yourself.
2. You will lose everything you have.
Nothing could be further from the truth. The fact is that most people who file for bankruptcy don't lose anything. Laws vary from state to state, and every state has exemptions that protect certain kinds of property. California for example, has comprehensive exemptions to cover such things as your house, your car or truck, household goods, home furnishings, IRA's, retirement plans, the cash value of life insurance, wages and personal injury claims. There is even a "wildcard" exemption that can be applied wherever you want it. In the rare case where you have more property than can be protected by the exemptions, Chapter 13 is an option. In a Chapter 13 you can even keep the property by making a Chapter 13 payment.
3. It's really hard to file for bankruptcy.
No it's not, at least not in the hands of an experienced bankruptcy attorney. If the case is filed by an experienced bankruptcy attorney with a highly qualified staff, filing bankruptcy is easy. The decision to file may be the hardest part, but once the decision is made the filing part is easy.
4. Only deadbeats file for bankruptcy.
Not true. In our experience most of the people who file for bankruptcy are good, honest, hard working people just like you and me. Most people are filing as a last resort and only after months or years of struggling to pay bills left over from some life-changing event such as loss of employment, a divorce, a failed business venture, a serious illness, or a family emergency.
5. Filing for bankruptcy means you are a bad person.
Not true. There are very good reasons why Americans are filing bankruptcy in record numbers. It's not because they are bad people. The most common factor that contributes to someone filing for bankruptcy is loss of income. Let's face it, this economy is brutal and we are living through the worst recession since the Great Depression. Sometimes the money just isn't there. The bankruptcy laws were created with this in mind, to make sure that you have a way, if need be, to get free from the burden of debt and get a "fresh start."
6. If you're married both you and your spouse have to file for bankruptcy.
Not true. In many cases where both spouses have a significant amount of unsecured debt it makes sense, and saves money for both to file. But, it is never a requirement under the bankruptcy law. We have many successful cases where only one spouse has filed. Although the good news is that if it makes sense for both spouses to file, they can both file for the price of one filing.
7. Filing bankruptcy means no new credit for 10 years.
Not true. It is true that the bankruptcy will be reported to the three major credit bureaus for 10 years, but just because something is reported on your credit report does NOT necessarily mean it will have a negative effect on your credit. If you are anticipating making an appointment for a consultation with a bankruptcy attorney, your credit is undoubtedly a mess, maxed out or on a clear path to it. The damage has most likely already been done. Most of our clients are surprised to find that filing bankruptcy can be the first step in rebuilding their credit. In bankruptcy you will be able to discharge (permanently get rid of) debt, and getting rid of debt puts you in a better position to handle new debt if someone is willing to extend it to you. Many lenders feel that someone who has recently emerged from bankruptcy is a good credit risk for two very good reasons: you have no other debt and you can't file another bankruptcy for eight years. In our experience you should be able to re-establish good credit within 2 to 4 years after your bankruptcy discharges.
8. You can only file once for bankruptcy protection.
The truth is you can only file for Chapter 7 bankruptcy once every 8 years. But after 8 years, if need be, you can file again. In the case of a filing under Chapter 13 of the Bankruptcy Code, there is no such restriction. However, we hope you are never faced with the problem of filing more than one bankruptcy.
9. Even if you file for bankruptcy, creditors will still harass you and your family.
This is NOT true. In fact nothing could be further from the truth. As soon as you file for bankruptcy protection the Bankruptcy Court will issue an order instructing your creditors not to contact you. This order is sent out within one to three days following the filing. As soon as we file your case, we will provide you with proof of filing and your case number. If you are contacted by a creditor who has not received the court order, you merely have to advise them that you have filed for bankruptcy protection and give them your case number and our contact information and they will leave you alone. Your phone will stop ringing with collection calls and your hame will become quiet and peaceful. you can go back to doing what is important to you and your family and have peace of mind.
10. You can pick and choose which debts to include in your bankruptcy.
Sorry, but you can't. Doing so runs contrary to the Bankruptcy Code. Under the law, when you file bankruptcy you must list all your assets (property) and all your debts. Many people want to leave out a debt and keep paying on it. You can not "prefer" a creditor by paying one and not others, but if you feel strongly about paying an individual creditor, you may keep paying on the debt after the bankruptcy is discharged. In fact, after you file for bankruptcy there are some debts you have to keep paying on. For instance, if you have an auto loan or home loan and you wish to keep the property, you are advised to keep making the payments. As long as you remain current on the payments and maintain proper insurance, you are protected under the law. Even though you have filed bankruptcy, the creditor is still required to honor the terms and conditions of the loan.
For more information, or for an answer to a specific question which is not addressed above, please call 800-920-5351 to schedule a free confidential consultation.