Myths About Bankruptcy

There is so much false information out there about bankruptcy. In my opinion, many of the myths that exist arise when people consult well-meaning friends and relatives or are created by creditors trying to steer you away from bankruptcy. When you are considering filing bankruptcy, you need to consult with an attorney. Do not compare your possible case with the experiences of others. Every person's situation is different. Those differences may cause differences in your bankruptcy case.

You will not be able to get credit again.

Not True. Filing bankruptcy will actually provide you a new opportunity for credit. By filing bankruptcy you are wiping your financial slate clean. If you are keeping any assets that have an installment payment, like a car, making timely payments will start generating a good credit history right after you file. Some creditors will actually send you credit card offers shortly after your discharge is entered.

You can only file bankruptcy once.

Not True. You can file bankruptcy many times. There are, however, rules that limit how often you can file. You can only file Chapter 7 once every eight years. You can file Chapter 13 every two years. If you filed a Chapter 7 and want to file Chapter 13 you must wait six years. If you filed a Chapter 13 and want to file a Chapter 7 you must wait four years. If you filed a bankruptcy case that was dismissed, the above time restrictions do not apply.

You can't file bankruptcy because the law changed.

Not True. Law changes have imposed some additional requirements. If you hire an experienced bankruptcy attorney, you will not even notice the difference. In most cases, your ability to file bankruptcy is unchanged.

You can't discharge taxes in bankruptcy.

Not True. You can discharge income taxes that are more than three years old. There are other requirements that must be met, but if you owe taxes, you filed the tax return and more than three years have passed, you can discharge the taxes. Certain taxes, such as sales tax and employer trust fund taxes, cannot be discharged.

You and your spouse must file bankruptcy together.

Not True. Married people can file together or separately. In most cases spouses file together, but there may be occasions when separate filings are required or advantageous. There also may be occasions when only one spouse needs to file bankruptcy.

You are a bad person for filing bankruptcy.

Not True. Financial problems are caused by many different reasons - a job loss, medical illness or divorce. Bad things can happen to good people. Bankruptcy is the legal process that gives you an opportunity to get a fresh start that you cannot obtain otherwise.

You can pick and choose the debts to include in your bankruptcy.

Not True. You are required to list all of the debts that you owe and all of the assets that you own. Even if you want to continue to pay a debt you must list it. If you want to pay a debt after your case is over you can voluntarily do so, but you are not obligated to do so.

You will be harassed by creditors if you file bankruptcy.

Not True. When you file bankruptcy, an automatic stay is in place that prevents creditors from taking further actions without the court's permission. Creditors are also not allowed to contact you about a debt. When your discharge is entered, creditors are not allowed to contact you anymore about your discharged debts. If creditors do contact you in violation of the law, the creditor may be held in contempt and be required to pay damages as a result.

You will experience family trouble when you file bankruptcy.

Not True. Bankruptcy is actually a way that you can eliminate stress in your family relationships. Financial problems cause anxiety and certainly can strain your relationships. If you file bankruptcy and discharge your debts, you eliminate the financial problems that are causing the stress.