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You know all those bad things you've always heard about bankruptcy?
Most of it is NOT TRUE.
Here are the Top 15 Myths your creditors want you to believe and the reason why
every one of them is NOT TRUE.
Myth 1: Everyone will know you have filed for bankruptcy.
Myth 2: You will lose everything you have.
Myth 3: You will never be able to own anything again.
Myth 4: You will never get credit again.
Myth 5: Filing bankruptcy will hurt your credit for 10 years.
Myth 6: If you're married...both you and your spouse have to file for
bankruptcy.
Myth 7: It's really hard to file for bankruptcy.
Myth 8: Only deadbeats file for bankruptcy.
Myth 9: Filing bankruptcy means you're a bad person.
Myth 10: Filing for bankruptcy will hurt your credit.
Myth 11: Even if you file for bankruptcy, creditors will still harass you and
your family.
Myth 12: If you file for bankruptcy, it may cause more family troubles and may
even lead to divorce.
Myth 13: You can't get rid of back taxes through bankruptcy.
Myth 14: You can only file once for bankruptcy protection.
Myth 15: You can pick and choose which debts and property to list in your
bankruptcy.
Myth 1: Everyone will know you have filed for bankruptcy.
Unless you're a prominent person or a major corporation and the filing is picked
up by the media, the chances are very good that the only people who will know
about a filing are your creditors and the people who you tell. While it's true
that your bankruptcy is a matter of public record, the number of filings is so
massive, that unless someone is specifically trying to track down information on
you, there is almost no likelihood that anyone will even know you filed.
However, telling someone that someone else filed bankruptcy is good
gossip. Just like telling a someone you heard so-and-so is getting a divorce.
So, if you don't want everyone you know to know you filed bankruptcy, you
need to keep the information to yourself. As for newspapers, our experience is
that most papers don't include information about who filed bankruptcy, and
even if they did, think about it, who would be interested enough to read that
stuff.
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Myth 2: You will lose everything you have.
Nothing could be further from the truth. The fact is most people who file
bankruptcy don't lose anything.
First, while laws vary from State to State, every State has exemptions that
protect certain kinds of property. Using Oregon as an example, there are
exemptions to protect such things as your house, your car, your truck, household
goods and furnishings, IRAs, retirement plans, the cash value in life insurance,
wages, and personal injury claims. There is even a "wildcard" exemption of $400 that can be applied wherever you want it. In those
rarer situations where you have more property than can be protected by available
exemptions, there is Chapter 13. In Chapter 13 you can even keep this
property by paying a higher Chapter 13 plan payment.
Second, as mentioned above (Myth2), filing bankruptcy does not generally
wipe out liens. Therefore, if you want to keep a car, truck, home or business
equipment that serves as collateral for a loan, you need to keep paying on the
debt. If you make these payments and have exemptions to cover any value above
what is owed you can rest assured you will be able to keep these items.
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Myth 3: You will never be able to own anything again.
A surprising number of people believe this, but this is completely false. In
the future you can buy, own and possess whatever you can afford.
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Myth 4: You will never get credit again.
Quite the contrary. Filing bankruptcy gets rid of debt and getting rid of
debt puts you in a position to handle more credit, and this makes you look
more attractive to would-be lenders. In our experience, unfortunately, it
won't be long before you're getting credit card offers again. I say
"unfortunately" because we don't want you to get right back in debt again. At
first the would-be lenders will want more money down and will want to charge
you higher interest rates. However, over time, if you are careful, and keep
your job, and start saving money, and pay your bills, and do things that will
put good marks on your credit report, the quality of your credit will get
better and better. Generally, in our experience, if a client has not
re-established good credit in 2 to 4 years sufficient to buy a car or even a
house it's not because they filed bankruptcy. It generally means that
something else has happened after the bankruptcy to hurt their credit.
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Myth 5: Filing bankruptcy will hurt your credit for 10 years.
Not true. You are getting 2 completely different concepts confused with each
other. You are getting the fact that bankruptcy is reported on your credit
report for 10 years mixed up 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 standing.
First, let's get one thing out in the open. By the time you need to make an
appointment to see a bankruptcy attorney your credit is already messed up,
maxed out, or on a clear path to ruin. This being the case, you
ultimately have no credit for bankruptcy to hurt.
Furthermore, as mentioned above, in our experience if you have not
re-established good credit in 2 to 4 years after you file bankruptcy most
likely it has nothing to do with the fact that you once upon a
time filed bankruptcy, and it certainly has absolutely nothing to do with
the fact that your credit history still shows an old bankruptcy.
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Myth 6: If you're married...both you and your spouse have to
file for bankruptcy.
Not true. In many cases where both husband and wife have a lot of debt it
makes sense and saves money for them to both file, but it is never a
requirement under the law. We have many cases where only one spouse has filed.
The good news is that generally if it makes sense for both spouses to file
together they can both file for the price of one filing.
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Myth 7: It's really hard to file for bankruptcy.
No it's not. At least not in the hands of an experienced bankruptcy
attorney. In the hands of an experienced bankruptcy attorney filing bankruptcy
is easy. The decision to file may be hard, but once the decision is made the
filing part is easy.
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Myth 8: Only deadbeats file for bankruptcy.
Not true. Most of the people who file bankruptcy are good, honest, hard-working
people, just like you and me, who file as a last resort after months or
years struggling to pay the bills that left over from some life-changing
experience, such as a divorce, the loss of a job, a failed business venture, a
serious illness, or some family emergency, or because they honestly and
mistakenly fell into debt at a young age before they knew better, before they
knew anything about budgeting or how to manage money.
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Myth 9: Filing bankruptcy means you're a bad person.
Not true. There's a reason over 1,000,000 Americans file bankruptcy each
year and it's not because they're bad people. Lots of good, honest,
hard-working people fall on hard times. Let's face it, life can be
brutal and sometimes the money's just not there. The bankruptcy laws were
created with this in mind. To make sure you have a way, if need be, to get
free from the burden of debt, so that you and your family can have a
second chance at a "fresh start".
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Myth 10: Filing for bankruptcy will hurt your credit.
That's not true. Think about it. By the time you come to a bankruptcy
attorney your credit is already either messed up or maxed out. And if it's
already messed up or maxed out how can bankruptcy hurt it?
The big surprise for our clients is when we tell them that filing bankruptcy can
actually help them re-build their credit. Bankruptcy gets rid of debt and
getting rid of debt puts you in a better position to handle new credit if
only someone will give it to you. Therefore, bankruptcy is the first step in
the process of re-building your credit.
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Myth 11: Even if you file for bankruptcy, creditors will
still harass you and your family.
This is NOT true. In fact, nothing could be further from the truth. The minute
you file bankruptcy, the Bankruptcy Court issues an order telling all of your
creditors to leave you alone. No more phone calls. No more collection letters.
No more lawsuits. No repossessions. No foreclosures. Nothing. This order has a
name. It is called the "automatic stay"; and it is issued pursuant to 11 United
States Code, Section 362. The automatic stay prohibits you from any and all
collections actions. After you file bankruptcy, the creditor is not even allowed
to talk to you. In addition, the creditor must stop any collection attempts
already started. The automatic stay is very powerful, and puts the full weight
of the United States Courts to work for you, to make sure your creditors leave
you alone. If a creditor violates the automatic stay, you have the right to
bring the creditor before the Court for Contempt of Court, and to be compensated
accordingly. Believe me, Bankruptcy Court Judges do not take kindly to creditors
who ignore the automatic stay, and these Judges have been known to punish
creditors severely. Very simply, once you file for bankruptcy, creditors must
leave you alone or suffer the consequences.
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Myth 12: If you file for bankruptcy, it may cause more
family troubles and may even lead to divorce.
This is NOT true. Usually, it works just the opposite. Filing bankruptcy is not
the problem. The problem is not being able to pay your bills. All good, honest,
hard-working people feel a strong need to pay their bills, and not being able to
do so causes them to feel tremendous stress. Unless you do something to relieve
this stress, the stress can quickly build to the breaking point....the marriage
breaking point. Bankruptcy is designed to get you out from under the burden of
debt, to protect your property and to lower your stress level. 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 back into your relationship, which in
turn, gives your marriage a fighting chance.
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Myth 13: You can't get rid of back taxes through bankruptcy.
We get rid of old "income" taxes for our clients all the time. By "old" I mean
income taxes more than 3 years old. Under the law there are 3 or 4
qualifications that have to be met, but once these are met these taxes are
gone. Please note: Filing bankruptcy does NOT get rid of withholding or sales
taxes no matter how old they are.
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Myth 14: You can only file once for bankruptcy protection.
The truth is you can only file for a Chapter 7 bankruptcy once every 8
years. But after 8 years, if need be, you can file again. As for filing a
case under Chapter 13 of the Bankruptcy Code, there is no such restriction.
Hopefully, however, you will never need to file more than one bankruptcy.
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Myth 15: You can pick and choose which debts and property to
list in your bankruptcy.
Sorry, but you can't. Doing so would be against the law. Under the
law when you file bankruptcy you have to list all your property and all your
debts. Most people want to leave out a debt because it is their intent to keep
paying on it. The good news on this score is that you can achieve the same
goal, even though you have to list the debt. If you want to keep paying on a
debt after bankruptcy you can. After bankruptcy you can go back and pay
anybody you want. In fact, after you file bankruptcy there are some debts
you have to keep paying on. For instance, if you have a car, truck or house
loan, even though you list the debt in your bankruptcy, if you want to keep
the car, truck or house you have to keep paying on the debt. More
importantly, you need to know this. As long as you stay current on the
loan and keep the property properly insured you are protected under the law, and you get to keep the property because under the law the creditor
is stuck with you and can't do anything about it.
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