Top 10 Bankruptcy Myths

Myth 1: Filing for bankruptcy hurts your credit for 10 years.

Not True. Bankruptcy stays on your credit about 7 to 10 years. Although the bankruptcy will stay on your credit, you can start rebuilding your credit once your bankruptcy is discharged. You will get credit card offers and be extended credit right after the discharge of your bankruptcy. Bankruptcy wipes out debt, which in turn helps your credit score.

Myth 2:Everyone will know you filed for bankruptcy.

Not True. Bankruptcy is public record but unless you are famous, people aren’t going to go looking. The only people who are going to know are those who you tell and those who have access to the bankruptcy court record system.

Myth 3:It's hard to file for bankruptcy.

Not True. The bankruptcy reform act changed only the method in which Debtors qualify for the different types of bankruptcy. It doesn’t prevent people from filing and in most situations people are still able to get the same relief now as before the law changed. There is a lot of paperwork involved, but having a skilled attorney makes the process much smoother. Filing bankruptcy is electronic these days, which minimizes paperwork on your part.

Myth 4:You are a bad person/failure for filing bankruptcy.

Not True. There is a reason that over one million people file for bankruptcy each year and it is not because they are bad people. Bankruptcy is a means for good people who are going through bad times to get relief. Many times people have to file because they have lost their job, gone through divorce, or experienced medical illness. Bad times don’t make a person bad. Bankruptcy can provide the relief that good hardworking people need to get them out of the bad time. It provides hard working people with the fresh start that they deserve, but are not able to obtain.

Myth 5:You will lose everything you own.

Not True. Bankruptcy allows you to keep your property. Outside of bankruptcy you could lose your property to creditors, but once you have filed for bankruptcy you and your property are protected. Bankruptcy doesn’t always wipe out liens, which means if you want to continue to keep the property you will need to continue to pay the lien.

Myth 6:Both you and your spouse have to file bankruptcy together.

Not True. You can file together or separately, that is your choice. In many cases it makes sense for husband and wife to file together, but in some instances the spouse might not want to file. This is absolutely fine and definitely allowed by the court.

Myth 7:You can't get rid of back taxes in bankruptcy.

Depends. You can get rid of income taxes that are more than three years old by filing bankruptcy. There are several qualifications that have to be met in order for the taxes to be wiped out, but having a portion wiped out is better than none at all.

Myth 8:You can only file bankruptcy once.

Not True. You can file for bankruptcy as many times as you like. Although, you are limited by how often you can receive a discharge. You can receive a discharge from Chapter 7 once every 8 years. You can receive a discharge from Chapter 13 every 2 years. If you get discharged in a Chapter 7 you have to wait 6 years before getting a discharge from Chapter 13. If you get a Chapter 13 discharge then you need to wait 4 years to get discharged from a Chapter 7. However, there is no waiting period if your case is dismissed. You can file back to back should you choose.

Myth 9:Creditors can still harass you if you file for bankruptcy.

Not True. When the bankruptcy is filed, automatic protection is put onto you and all of your property instantly. Creditors are not allowed to contact you for any reason, which includes calling or even billing you. If they persist in harassing you, you do have remedies available through the Federal Bankruptcy laws.

Myth 10:Filing bankruptcy is emotional devastating.

Not True. Bankruptcy eliminates debt and eliminates financial stress. Filing bankruptcy is the solution to the problem, not an additional problem. Although making the decision to file bankruptcy might be difficult one, the relief provided will lift a huge weight off of you. You will be able to answer the phone, check the mail, and answer the door without fear that the contact is from a creditor or collection agency.