The Top 12 Myths About Bankruptcy

There are numerous false calms and misinformation that are being spread in our community about the bankruptcy laws. Most of these myths are being spread by those that have the most to gain by your failure to exercise your right to file bankruptcy.

Myth 1: Under the NEW bankruptcy law, there's no more bankruptcy and or it's too late to file.

NOT TRUE. The truth is that you can do just about everything when you file under the NEW law that you could do under the OLD law. The bankruptcy reform act changed the method in which Debtors qualify for the different types of bankruptcy. 

Myth 2: Everyone will know you have filed for bankruptcy.

NOT TRUE. Unless you're famous, or well known, the chances are very good that those people who will know about your filing are your creditors and the people you tell.

While it's true that bankruptcy is a matter of public record, the number of filings is so huge, that unless someone is specifically trying to track down information on you, there is almost no likelihood at all that anyone you know will know you filed.

Myth 3: You will lose all your property.

NOT TRUE.  Most of our clients don't lose anything. Most Bankruptcy cases filed by individuals are "no asset" cases in which the debtor keeps everything he owns. That's because the Debtor is entitled to exemptions which provide for the protection of the Debtor’s assets.
 
Myth 4: You will never be able to own anything again.

NOT TRUE.     Not True.  The bankruptcy laws are intended by Congress to provide you with a fresh start. That “fresh start” includes the ability to own real estate and vehicles and other property. Although it does take some time and effort, many clients are able to improve their credit typically within 6 to 12 months and can go on to purchase motor vehicles and real estate.

Myth 5: You will never get credit again.

NOT TRUE. The truth is that you are more likely to obtain credit after your file, than if you don’t file. Filing bankruptcy gets rid of certain debt and getting rid of your debt make you more attractive to banks, credit card companies and other lenders.

Myth 6: Only deadbeats or irresponsible people file for bankruptcy.

The truth is just the opposite. Filing bankruptcy means you’re a good person, acting responsibly.  Filing bankruptcy gets rid of certain debts, getting rid of certain debts frees up money to help you take care of yourself and your family and obligations which are not dischargeable such as student loans, child support and some taxes.

Honest, hard-working people fall on hard times. Pay reductions, job loss, uninsured medical expenses, death of a family member and other family emergencies, bad decisions, failed businesses, etc., are just some of the facts of life.

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 7: Filing bankruptcy will damage your credit for 10 years.

NOT TRUE.  You are getting the fact that bankruptcy is reported on your credit report for up to 10 years confused with the effect that reporting will have on your credit. Just because something is reported on your credit report does NOT necessarily mean it will have a negative effect on your credit score.

By the time you meet with a bankruptcy attorney, your credit is probably severely damaged. If your credit score has already been damaged, bankruptcy cannot and will not diminish it further. If you begin to pay your new bills on time, after filing for bankruptcy, your credit score will begin to improve fairly soon.

Myth 8: If you're married...both you and your spouse have to file for bankruptcy.

NOT TRUE.

We have filed many cases where a husband, or a wife, but not both, filed bankruptcy. In many of those cases, where husband and wife both have a lot of debt, it makes sense and saves money for them to both file, but it is not a ‘requirement’ of the bankruptcy laws. In many situations, however, there is no good reason at all for the second spouse to file. In those situations, we file for only the spouse who needs the help, and leave the other spouse completely out of it.

You should understand that under the new laws, the income of both parties is used as the basis for certain calculations that have to be made, but the use of a non-filing spouse’s income does not involve the non-filing spouse in the bankruptcy in any other way.

Myth 9: Only deadbeats file for bankruptcy.

NOT TRUE.

Good people, who realize that they have a duty and responsibility to put their families first, file bankruptcy.

Most of the people who file bankruptcy are good, honest, hard-working people, who file for protection as a last resort after months or years of struggling to pay their bills. They have exhausted all their resources: family savings, §401(k) and IRA Plans, life insurance cash values, the equity in their home. Everything they have had. You’re completely wrong in thinking that you’re a deadbeat if you file bankruptcy. If you need to file, filing bankruptcy is actually one of the most positive, responsible, honorable and noble steps you can take on behalf of your family and your family’s future, happiness and prosperity.

The right to file for bankruptcy is arguably the most powerful right that the United States provides to anyone other than the right to vote.
It’s possible that you have overwhelming debt, or you got behind on something as valuable as your house or car, after some life-changing experience, such as a loss of your job, salary reduction, divorce, a failed business venture, a serious illness, or some family emergency. Or perhaps, you honestly and mistakenly fell into debt at a young age before you knew better, before you knew anything about budgeting or how to manage money. By addressing your current situation, you are exactly the opposite of a “Deadbeat.” Deadbeats are the people who continue to let themselves get crushed by debt year after year, or continue to let creditors use and abuse them, who continue to pay out good, hard-earned money to creditors at the expense of their families, and who continue to just sit back and take it, when there is something they can do about it. If you were a deadbeat you wouldn't care. The good, responsible people, who file bankruptcy, care about themselves and their families.

Myth 10: Even if you file for bankruptcy, creditors will still harass you and your family.

NOT TRUE.

The minute you file bankruptcy, the Bankruptcy Court issues an order called the "automatic stay." The automatic stay tells all of your creditors to leave you alone, or else. It is issued pursuant to United States Code 11, Section 362.

The automatic stay protects you from any and all collections actions. After you file bankruptcy, the creditor is not even allowed to talk to call or write to you. In addition, the creditor must stop any collection attempts already started. The automatic stay is very powerful. It is enforced by the United States’ Courts and it makes sure your creditors leave you alone. If creditors violate the Automatic Stay, they can be severely sanctioned and penalized by the court.

Fight back with the rights that you have! The U.S. Bankruptcy Code is one of your most powerful set of rights. Once you reach out for the protection that only the U.S. Bankruptcy Code can provide, you will not receive any more phone calls. You will not receive any more collection letters. You will not receive any more lawsuits. No repossessions. No foreclosures. No more threats. Nothing! The protection and help that you get by taking advantage of the U.S. Bankruptcy Code is that powerful. Nowhere else can you get it! The attorneys at Town and Country Legal Associates feel great that we can help our clients obtain this kind of aid.

Myth 11: If you file for bankruptcy, it may cause more family troubles and may even lead to divorce.

NOT TRUE.

The opposite it usually true.

Filing bankruptcy is not the problem. The problem is not being able to pay your bills and not being able to provide for your family. This is what causes the stress and anxiety to build and build.

All good, honest, hard-working people feel a strong need to pay their bills. Not being able to pay those bills causes those people to feel enormous stress.

Unless you do something to relieve this stress, it can quickly build to a breaking point such as divorce.

Bankruptcy is designed to get you out from under the burden of debt, to protect your property, to lower your stress level and to let you…once again sleep at night. If your experience is like that of other couples, you will find that filing bankruptcy (and lowering the stress level) can be a crucial first step in bringing the love and caring…not to mention hope…back into your relationship.

Myth 12: You can only file once for bankruptcy protection.

NOT TRUE.

The truth is, you can file and get a “discharge” under Chapter 7 once every 8 years. As for filing a Chapter 7 after filing and getting a discharge in Chapter 13, the wait is 6 years, computed from one “date of filing” to another.

As for filing a case under Chapter 13 of the Bankruptcy Code, the wait is only 4 years after a prior discharged Chapter 7, or 2 years after a prior discharged Chapter 13 case.

If a prior bankruptcy case was “dismissed” as opposed to “discharged”, in most cases, there is no required wait time between bankruptcy filings.

Hopefully, however, filing one bankruptcy will be enough to get your life back.

The bankruptcy laws were created by Congress with just these circumstances in mind and Congress’ intent was to make sure that you and your family have a way to overcome the overwhelming burden of debt, to make sure that your family does come first, and so that you and your family can have a second chance at a "fresh start".