Bankruptcy Law Myths

I will lose everything if I file for bankruptcy

This is the misconception that keeps people who really should file for bankruptcy from doing it. While the bankruptcy laws vary from state to state, every state has exemptions that protect certain kinds of assets, such as your house, your car (up to a certain value), money in qualified retirement plans, household goods and clothing. If you have a mortgage or a car loan, you can keep those as long as you keep making the payments.

I will never get credit again

False, it’s quite the contrary. It won't be long before you're getting credit card offers again. Also, if you have a credit card with a zero balance on the day you file for bankruptcy, you don't have to list it as a creditor since you don't owe any money on it. That means you might be able to keep that card even after the bankruptcy.

Only deadbeats file for bankruptcy

Not true, most people file for bankruptcy after a life-changing experience, such as a divorce, the loss of a job or a serious illness or accident or drop in income. They've struggled to pay their bills for months and just keep falling further behind. Bankruptcy is to help get rid of debt that cannot be repaid.

Everyone will know I 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 that the only people who will know about a filing are your creditors and whoever you tell. While it's true that bankruptcy is a public record, one would have to check the Court records or legal newspaper to know you’ve filed Bankruptcy, it’s unlikely as the number of people filing is so massive.

Filing for bankruptcy is hard's least not in the hands of an experienced bankruptcy attorney. In the hands of an experienced bankruptcy attorney, filing bankruptcy is what the attorney does. The decision to file for bankruptcy may be hard, but once the decision is made, the filing part is easy for you.

I can only file for bankruptcy once

You can only file for Chapter 7 bankruptcy once every eight years (Before the new bankruptcy law passed in 2005, you could file every six years.) For Chapter 13 reorganization, you can file more often than that, but you can't have more than one case open at the same time. You can file Chapter 13 after Chapter 7 and don’t have to wait for 8 years.

Bankruptcy wipes out all debts

Almost all debts are wiped out in Chapter 7. Certain types of debts cannot be erased. They include child support and alimony, student loans and debts incurred as the result of fraud or drunken driving judgment against you. If you've defrauded someone and a judgment has been made against you, that won't be erased either.

I can max out my credit cards, file for bankruptcy and never have to pay for the things I've purchased

Not a good idea and it may be considered bankruptcy fraud. Creditors have the right to object to this kind of action and if the creditor succeeds the debt is not discharged or possibly the entire case may be thrown out of court.