Bankruptcy Misconceptions

1. It's very difficult to file for bankruptcy.
It is not difficult to file for bankruptcy. But it is recommended that you hire an experienced bankruptcy attorney to make sure that its done right, and that alternatives to bankruptcy are fully explored.

2. Only "deadbeats" file for bankruptcy.
You can let go of this misconception about bankruptcy. Most people file for bankruptcy after a life-changing experience, such as a loss of a job, a serious illness, or a divorce. They've struggled to pay their bills for months and just keep falling further behind. Bankruptcy is a financial tool that at times, could make sense for almost anyone, including people and companies known for their wealth, or past business successes.

3. If you're married, both spouses have to file for bankruptcy.
This is not necessarily true. It often happens that one spouse has a significant amount of debt in his or her name only. However, if spouses have debts they want to discharge that they are both liable for, they should file for bankruptcy together. Otherwise, the creditor will simply demand payment for the entire amount from the spouse who did not file for bankruptcy.

4. Everyone will know you filed for bankruptcy.
Not True. 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.

5. You can't get rid of back taxes through bankruptcy.
Generally speaking, this is true. As the old saying goes, there are two things in life on which you can be fairly certain. . . but there is such a thing as tax bankruptcy. To have a chance of success, you have to file all your returns and the taxes owed need to be at least three years old.

6. You can only file for bankruptcy once.
This is not true. You can file for Chapter 7 bankruptcy once every eight years. For a Chapter 13 court-approved debt repayment plan, you can file more often than that, but you cannot have more than one bankruptcy case going at one time. It's probably not a great idea to make a habit of filing bankruptcy, however.

7. I can max out all my credit cards, file for bankruptcy, and never pay for the things I bought.
If it sounds to good to be true, it probably is. Proceed in this fashion, and you could be charged with fraud. Fraud is definitely is not condoned by bankruptcy judges. The trustee in your case will review all your purchases right before your filing. Bankruptcy trustees know what to look for to find fraud. Put the credit card back in your wallet or purse.

8. I should not include certain creditors in my bankruptcy filing because it's important to me to pay them back someday and if the debt is discharged (under a Chapter 7 liquidation), I can't ever repay them. It's a nice idea. After a successful bankruptcy, most of your debts will be discharge, and you are no longer obligated to repay them, but you would always have that opportunity. It is your choice. If your conscience bothers you because you didn't pay your debts, there's nothing in the Bankruptcy Code that prevents you from doing that once you get back on your feet. However, bankruptcy is an all-or-nothing deal, so you must include all your creditors in the bankruptcy petition.

9. I will lose everything you own.
Not True. Bankruptcy allows you to keep your property. Outside of bankruptcy you could lose your property to creditors, but once you have filed for bankruptcy you and your property are protected. Laws that allow you to keep property vary from state to state and you should consult an attorney in your area to property advise you of the laws in your jurisdiction. Bankruptcy doesn’t always wipe out liens, which means if you want to continue to keep the property you will need to continue to pay the lien.

10. I will never be able to own property again.
Not True. You will get credit card offers and be extended credit right after the discharge of your bankruptcy. There are also creditors that will lend to you while you are in bankruptcy. You will be able to purchase whatever you can afford.