| 1. Everyone will know I filed bankruptcy. |
Bankruptcy is a public legal proceeding, but unless you are famous and the
media picks up the filing, the odds are pretty good the only people who will
know about the filing are your creditors and any people you tell. [top] |
| 2. I’ll lose everything |
This is a common myth. Bankruptcy laws vary from state to state, but all
states have exemptions to protect assets such as household goods, clothing,
a car (up to a set value), and money in qualified retirement plans. [top] |
| 3. Only deadbeats file for bankruptcy. |
The majority of people who file for bankruptcy do so after a life-changing
experience such as a divorce, job loss, serious illness or accident. They
have struggled to heal emotionally and catch up financially but continue to
fall further behind paying their bills and need help taking back control. [top] |
| 4. Most of my debt is back taxes, and bankruptcy can’t get rid of taxes. |
It depends on the specific circumstances regarding your tax debt. In a
nutshell, if all returns have been filed and the taxes are at least three
years old then there is a shot at having them discharged. Talk to an
experienced bankruptcy attorney regarding back taxes. [top] |
| 5. Chapter 7 discharges all debt. |
False. Chapter 7 does not discharge child support, alimony, student loans,
and debts from fraud, court fees, traffic tickets, and fines. It is also unlikely that a
judgment ordering restitution will be discharged. Instead, what can be
discharged is unsecured debt (medical bills, credit card debt, some personal
loans, etc) and some taxes are dischargable. [top] |
| 6. It’s really hard to file for bankruptcy. |
It’s really not that hard with an experienced bankruptcy attorney on your
side, just a lot of paperwork and several hours of your time to complete the
bankruptcy petition, assorted schedules and collect the required supporting
documentation. [top] |
| 7. If I am married, my spouse has to file bankruptcy with me. |
Not necessarily. If you have more debt in your name only, it is okay to
file as an individual. However, if you and your spouse have joint debts you
are both liable for, then it is a good idea to file together so the debt can
be discharged for both of you. Otherwise if you discharge the debt from
your name only, the creditor may demand payment for the entire amount from
your spouse. [top] |
| 8. If I still have available credit on my cards, can I go buy
everything I want, file bankruptcy and never pay for anything? |
No, going on a shopping spree and then filing bankruptcy is fraud. The
credit card companies will file an adversarial complaint(s) against a
discharge and present proof of the shopping spree via credit card charges.
The trustee will review all of your purchases right up to filing.
Bankruptcy rules prevent a discharge of debt in the event of fraud, which
means you are still liable to pay the bills from the shopping spree. [top] |
| 9. Do I have to include everyone I owe money to? What if I want to
pay them? |
All creditors must be included in a bankruptcy petition and you are no
longer obligated to pay them after discharge; however, there is nothing in
the bankruptcy code that prevents you from paying a debt later. [top] |
| 10. Will I ever have credit again? |
Actually, it will only be a few weeks after your bankruptcy petition is
filed before you start receiving credit card offers in the mail. However,
the offers will typically offer credit at an extremely high interest rate.
It is a good idea to learn to live on your paycheck without going into debt
before applying for a credit card. With wise credit choices you will
rebuild your credit and be ready to buy a car or even a home within a few
years. [top] |