Bankruptcy often gets a bad rap. But like many scary things bankruptcy's reputation is often made up of a little truth and a lot of exaggerated misconceptions. Once you are able to separate the myths from the facts though, bankruptcy suddenly becomes much less frightening.
I can max out all of my credit cards right before filing for bankruptcy and never pay for what I bought.
Myth: Do not incur any debt in anticipation of filing for bankruptcy. This is considered fraud. Not only will this debt not be discharged, your case will likely be dismissed, and you could face Federal charges
I only have to list the creditors in my bankruptcy that I do not want to pay back.
Myth: You must list all of your creditors in your schedules even if you want to repay them. Although you are no longer obligated to repay these creditors after you receive a discharge in Bankruptcy, you always have the opportunity. There is nothing in the Bankruptcy Code that prevents you from doing so.
I will never get credit again after filing for bankruptcy.
Myth: Nothing on your credit report is permanent. You can start rebuilding your credit immediately after filing for Bankruptcy by paying your mortgage, car loan, utilities and related bills on time each month. After Bankruptcy, new credit card offers will come immediately, car loans will be available with high interest rates shortly thereafter, and you may qualify for a new mortgage in around 2 years. Apply for a little new credit at a time, and then only use a small portion of your available credit.
If I am married, my spouse and I have to file for bankruptcy together.
Myth: It is not necessary for both parties to file together. If one spouse has a lot of debt in his name alone, he can file alone. However, if there is debt that both parties are liable for, then they should file jointly. If they do not then the creditors will simply come after the non-filing spouse for the total debt.
Everyone will know that I have filed for bankruptcy.
Myth: Unless you are famous, chances are the only people that will know about your bankruptcy are your creditors. Bankruptcy is a public proceeding; however, there are so many filings very few publications are going to publish them all.
I will lose everything that I have if I file for bankruptcy.
Myth: There are State and Federal exemptions to protect certain assets, such as, homes, cars, retirement accounts, household goods, and clothing. The amount and types of exemptions vary from State to State. Many people complete their Bankruptcy case without losing anything at all.
All debt is discharged in a Chapter 7 bankruptcy.
Myth: There are certain types of debt that are not usually discharged. Some common ones are: child support and alimony, student loans, personal injury from drunk driving, criminal fines and restitution, income taxes, and fraud.
Only deadbeats file for bankruptcy.
Myth: No one wants to file for bankruptcy, but sometimes circumstances occur that are beyond our control. Such as, lay-offs, medical conditions, foreclosures, or even being a victim of identity theft. Many Bankruptcy filers are courageous, dedicated, and honorable. They handle their financial problems; are truthful about their situations, assets, and debts; and perform all the obligations required of them by law before and during their cases.
You can only file for bankruptcy one time.
Myth: Although filing multiple bankruptcy cases will make it more difficult for you to re-establish your credit, if it becomes necessary – it is possible. Your ability to file an additional bankruptcy will depend not only on when you filed your last case, but also if it was a Chapter 7 or Chapter 13, and if you received a discharge.
Filing for bankruptcy is hard.
Myth: Although the bankruptcy laws are very complex, having an experienced attorney on your side can make filing quite simple. The attorneys at Walden & Pfannenstiel walk their clients through every step of the process. Knowledge is power, and sometimes a fresh start just makes sense.