Bankruptcy Myths

Top 10 Myths about Bankruptcy

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. Making current, timely or on time full payments on debt is one way to start building your credit while you are still in bankruptcy.

Myth 2:
Everyone will know you filed for bankruptcy.

Not True. The bankruptcy is public record but unless you are a prominent official in society, people aren’t going to go looking. The only people who are going to know are those you tell and those who have access to the bankruptcy court record system. Some people think that newspapers carry bankruptcy filing information, but in our area, this is simply not true.

Myth 3:
The new law makes it impossible to file 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 file the same type of case they would before the new law came about.

Myth 4:
You are a bad person 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 solution to help good people go through a bad time. It provides hard working people with the fresh start that they deserve.

Myth 5:
It’s hard to file for bankruptcy.

Not True. There is a lot of paperwork involved, but having a skilled attorney makes the process much smoother. Filing bankruptcy is even electronic these days, which minimizes paperwork on your part.

Myth 6:
You will lose everything you own.

Not True. Bankruptcy allows you to keep your property. Outside of bankruptcy, you can lose your property to creditors, but once you have filed for bankruptcy you and your property are protected.

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. In addition, sales taxes must be repaid and cannot be wiped out by filing bankruptcy.

Myth 8:
You can only file bankruptcy once.

Not True. You can file bankruptcy as many times as you need to. Although, you are limited by how often you can receive a discharge. You can receive a Chapter 7 discharge once very 8 years. You can receive a discharge from Chapter 13 every 2 years.

Myth 9:
Only losers file for bankruptcy.

Not True. 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 help them out of the bad time.

Myth 10:
Creditors can still harass you if you file for bankruptcy.

Not True. When 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.