Myths about Bankrtupcy
Bankruptcy is immoral
Wrong! Don’t let anyone make you feel bad or in any way self-conscious for considering bankruptcy. Bankruptcy has existed for centuries in many cultures because people have financial troubles and sometimes they need help. Most people face serious financial difficulties at one time or another, and when bills pile up, some individuals have no realistic opportunity to repay the debt. Societies, including our own recognized this and provide people with a way out. So don’t let anyone criticize you for thinking about bankruptcy.
Most people do not qualify for bankruptcy
Wrong! Although the amendments to the bankruptcy law in 2005 require debtors to pass a means test before being allowed to file for bankruptcy under Chapter 7, most debtors will have income that falls under the means test’s standards. The means test basically prevents people from filing for Chapter 7, but not Chapter 13, if their income is more than the median income level for their state. Most people that are considering filing bankruptcy are doing so because they can’t pay their bills. Usually the reason they can’t pay their bills is because they don’t make enough money. If they don’t make enough money, the means test is not a problem. In those cases where the means test does prevent one from filing Chapter 7, Chapter 13 will still be an option where the debtor may only have to pay a small percentage of his or her total debt.
I won’t be able to qualify for credit after filing bankruptcy
Wrong! Actually, you might be flooded with credit card offers almost immediately after you file for bankruptcy. Of course, the offers will likely come with a slightly higher interest rates but the credit will be available. Therefore, assuming you need to buy a car, you will most likely be able to find a lender willing to give you credit.
Filing for bankruptcy hurts your credit for 10 years
Wrong! 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, full payments on debt is one way to start building your credit while you are still in bankruptcy.
Creditors can still harass you if you file bankruptcy
Wrong! When the 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.
Everyone will know you filed for bankruptcy
Wrong! 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 who 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.
I’ll have to give up all of my property if I file for bankruptcy
Wrong! Most people filing Chapter 7 bankruptcy will find that the majority, if not all, of their property is exempt and they will be able to keep it after bankruptcy. Assuming certain property such as a house or a car is not exempt; the debtor still has a couple of alternatives. The debtor may be able to keep it by filing for Chapter 13 (Chapter 13 requires you to pay back some of your debt, but it may not be as much as you think), or the debtor may keep the property by reaffirming the debt and continue paying on it after bankruptcy. Note that reaffirmation may not be possible in Chapter 7 if the debtor has substantial equity in the asset.
I’m married, and if I file, my spouse must file with me.
Wrong! There is no requirement that married people must file bankruptcy together, however depending on your situation, it may be to your benefit. If one spouse has a significant amount of debt that is in his or her name only, then it makes sense to file for bankruptcy along. However, if there is debt that is held by both spouses, they probably will want to file jointly to prevent the creditors from trying to collect from the non-filing spouse.
I filed bankruptcy once, so I’m not allowed to do it again.
Maybe. You are only allowed to file for Chapter 7 bankruptcy once every 8 years. You may file for Chapter 13 bankruptcy more often, but you are not allowed to have more than one Chapter 13 case pending at any one time. If you previously filed Chapter 7 bankruptcy, you must wait 4 years before being able to file for Chapter 13.
