Bankruptcy Myths
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There are many myths and misconceptions about filing for bankruptcy.
Bankruptcy relief is no longer an option.
Almost all of the relief formerly available through bankruptcy survives in today's bankruptcy code. It is a little more involved and somewhat more expensive, but it still works.
I will lose everything I own.
More than 95 percent of bankruptcy cases filed by individuals are no asset cases. These are cases in which the debtor keeps everything he or she owns. This is because exemptions allow for the debtor to keep some assets such as pensions, and they are beyond the reach of bankruptcy trustees and creditors.
My boss will find out I filed for bankruptcy and fire me.
Legally, your boss cannot discriminate against you solely because you filed for bankruptcy. In fact, unless you tell your employer, they probably won’t even know.
Filing bankruptcy will ruin my credit.
Yes, filing bankruptcy will damage your credit and will be on your credit report for up to 10 years. Be honest with yourself. If you are considering hiring a bankruptcy lawyer, your credit probably is not in the best shape. In the long-run, your credit score may go up because your debt-to-credit ratio may actually improve.
I will never be able to get credit again.
Initially, you will probably not be able to get a new credit card. However, credit card companies will typically start sending you offers for a new credit card within three to four months of your discharge. Be very careful with these offers because creditors know that you will not be able to file bankruptcy again for another eight years. This means they have at least eight years to let you rack up debt, and you can’t do anything to avoid paying them.
Medical bills can't be discharged in bankruptcy
Not true. Medical bills can be discharged in bankruptcy.
Chapter 13 plans require full repayment of debt.
Chapter 13 plans can range from plans that pay general unsecured creditors nothing, to plans that pay 100 percent, to everything between.
Bankruptcy is a sign of personal or moral failure.
Bankruptcy is a right guaranteed by law and is provided for in the U.S. Constitution and even the Bible. Many people are surprised to hear this, but in several different places (including Deuteronomy 15:1–2) the Bible provides for periodic release from debts. “At the end of every seven years thou shalt make a release. And this is the manner of the release: every creditor shall release that which he has lent unto his neighbor and his brother; because the Lord’s release hath been proclaimed.”
The negative stigma that bankruptcy carries has largely been spread by the credit card industry because they want to be paid. The fact is that sometimes we all need help, and you shouldn’t feel badly about doing what is right for you and your family.
Famous Bankruptcies
If that’s not enough, consider that plenty of famous people like Toni Braxton, Johnny Unitas, Henry Ford (yes, that Henry Ford), Burt Reynolds, MC Hammer, Larry King, Jose Conseco, and many more have filed for bankruptcy and have gone on to have successful careers and personal lives.
Married couples must file together.
While spouses may file a joint case; they do not have to file together. If only one spouse files, careful attention is required to understand what property will be treated as property of the bankruptcy estate.
My friend told me that if I am going to file bankruptcy I should max out my credit cards.
Absolutely do NOT do this! Accumulating debt with the intention of filing bankruptcy can be considered fraud by the court, and the court could dismiss your case or not discharge your debt.
