8 Common Bankruptcy Myths

We find that there are some common myths about bankruptcy; call them miss-perceptions or simply common misunderstandings about the current bankruptcy laws. In this article, we will clear-up some of these myths about bankruptcy. In order for you to make an informed decision on your options, it is important that you are aware of the facts as opposed to the myths about bankruptcy. Once we separate fact from fiction you may find that you have options that you never thought about before.

 

Myth #1: Filing for bankruptcy will ruin my credit for 10 years.

False. It’s true that a bankruptcy will appear on your credit report for 10 years, but many people are able to restore and rebuild their credit within just a few years after filing for bankruptcy. What normally ruins people’s credit is not the fact that they filed for bankruptcy, but that they did not pay their bills or debts on time. After you have filed for bankruptcy, all of your discharged debts are eliminated, which means you get a chance for a clean start. If you pay all of your bills on time and do not fall behind on any payments, you will see your credit score improve, despite the fact that you have a bankruptcy on your credit report.

Myth #2: I will lose my house and car.

False. Bankruptcy is designed to help people who are struggling with too much debt by alleviating their financial burden. Bankruptcy was not designed to punish people who do not pay their debts by selling their homes or cars.

Myth #3: I cannot get new credit after filing for bankruptcy.

False. Many people are surprised to find that they actually have an easier time obtaining credit after filing for bankruptcy. The reason for this is because prior to filing for bankruptcy, there may have been a lot of unpaid debt listed on your credit report. After filing for bankruptcy, the majority of that debt has been completely erased forever. In the eyes of the credit company, you are like a clean slate with no debt. This makes you a more desirable candidate for credit. In fact, it usually takes less than one year or so after a bankruptcy discharge to acquire new credit.

Myth #4: I will never be able to purchase a car or home again after bankruptcy.

False. Almost all of our clients have been able to purchase a home or car after filing for bankruptcy. It usually takes about two years after bankruptcy before you can purchase a house and even less time to purchase a car.

Myth #5: My spouse will be held liable for my debt.

False. This is never the case. Unless your spouse co-signed for the debt, he/she cannot be held liable. The best way to tell for sure, if your spouse will be liable for your debt, is to consult an experienced bankruptcy lawyer. When you come to our office, we will review both your case and your financial situation, and help you determine how a bankruptcy filing would affect both you and your spouse.

Myth #6: Filing for bankruptcy makes me a bad person.

Absolutely false. Thousands of good, decent, responsible people file for bankruptcy every year. All it takes is one unexpected incident to throw an otherwise financially secure and responsible person into debt. Family emergencies, unexpected job losses, sudden illnesses, a death in the family, etc can all result in debt. Furthermore, it is much more admirable to take responsibility for your debt through bankruptcy than simply ignoring your creditors and continuing to avoid making payments towards your debt. This is one of the common bankruptcy myths!

Myth #7: My employer can fire me because I filed for bankruptcy.

False. It is not only illegal, but it’s also unethical for your employer to fire you because you filed for bankruptcy. If you can prove that your employer fired you solely because of your bankruptcy, then you can sue him or her for wrongful termination.

Myth #8: A debt counselor can help me eliminate my debts so I can avoid bankruptcy.

False. It’s extremely important to understand that debt counselors cannot help you eliminate your debt. Often, the most practical way to eliminate your debt and file for bankruptcy is to retain the services of an experienced bankruptcy lawyer.