Top 7 Bankruptcy Myths
A "Myth" is defined as, "A widely held but false belief or idea." There are lots of myths about bankruptcy. Here are a few:
Myth 1: Everyone Will Know You Filed for Bankruptcy
FALSE. 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 who you tell. While it's true that your bankruptcy is a matter of public record, so many people have filed—well over 1 million people file each year—unless someone is specifically trying to track down information on you, there is almost no likelihood that anyone will even know you filed. Bankruptcy filings don't typically show up in Google searches.
Myth 2: You Will Lose Everything You Have
FALSE. Nothing could be further from the truth. The fact is that most people who file bankruptcy keep everything they have—-their home, their cars, and their household items—and don't lose anything except their debts. Once your case is over, you can buy, own and possess whatever you can afford. Virtually all of my clients receive pre-approved car loans and credit cards as soon as they receive their discharge. Many of my bankruptcy clients have bought or refinanced homes after their case has ended.
Myth 3: You Will Never Get Credit Again
FALSE. Filing bankruptcy gets rid of debt, which makes you look more attractive to would-be lenders. Once you get your bankruptcy discharge, you will be flooded with offers for new credit cards and car loans. At first, lenders will want more money down and will want to charge you higher interest rates. However, over time, if you are careful, keep your job, start saving money, pay your bills, and do things that will put good marks on your credit report, your credit scores will get higher, and the terms you can get will improve.
Myth 4: Both Spouses Have to File
FALSE. In cases where both husband and wife have a lot of debt, it makes sense and saves money for them to both file, but it is never a requirement. In fact, in many of the cases we file where our client is married, only one spouse files. And if you don't have any joint debt, your filing will have no direct impact on your spouse's credit.
Myth 5: Only Deadbeats File for Bankruptcy
FALSE. The vast, overwhelming majority of the people who file bankruptcy are good, honest, hard-working people, just like you, who file as a last resort. They have spent months or years struggling to pay the bills left over from some life-changing experience, such as a serious illness, the loss of a job, separation or divorce, a failed business venture, or some family emergency.
Myth 6: Bankruptcy Won't Stop Creditor Harassment
FALSE. The minute you file bankruptcy, the Bankruptcy Code enters an "Automatic Stay" telling your creditors to leave you alone. No more phone calls. No more collection letters. Foreclosures are stopped. Lawsuits are stopped. Garnishments are stopped. Repossessions are stopped. The Automatic Stay stops your creditors -- even the IRS -- from taking any collection actions against you or your assets. Once you file bankruptcy, your creditors are not even allowed to talk to you or send you letters or bills.
Myth 7: You Can't Get Rid of Taxes in Bankruptcy
FALSE. We have gotten rid of millions of dollars of back taxes for our clients. Most federal, state, and local income taxes, inheritance taxes, and personal property taxes can be wiped out under the bankruptcy laws. There are several qualifications that have to be met, but once they are, these taxes are gone. Bankruptcy even stops IRS levies and liens.
We deal in reality, not myths. If we can help solve your real financial issues, please let us know.