Bankruptcy Myths

1. Bankruptcy will ruin my credit.

Probably not true. In fact, depending on whether your credit score is already suffering, bankruptcy might cause it to actually go up. 

2. Everyone will know that you have filed for bankruptcy.

Not true. While a bankruptcy is a public legal proceeding, unless you are a prominent person or a major corporation it is very unlikely that anyone but your creditors will know you have filed for bankruptcy. Look at your local newspapers and see if they report bankruptcy filings. Certain public information is reported, such as divorces, real estate transactions, and certain other public filings. But, most newspapers do not publish lists of the people who have filed bankruptcy. Check the newspapers in your area. The most likely way that your friends or family members will find out that you filed bankruptcy is if you tell someone and then the secret spreads.

3. You will lose everything that you own.

Not true. When filing for bankruptcy you are allowed to “exempt” a certain amount of property. This is the property that you are allowed to keep and which will not be sold for your creditors. The amount of property you are allowed to keep is very generous. Most people that file bankruptcy are allowed to keep all of their property. So, instead of losing everything you own, the chances are good that you would keep everything that you own. Part of your free initial consultation would be to analyze your property and to determine whether it is likely that you would be able to fully exempt all of it.

4. You are a bad person for filing bankruptcy.

Not true. Over one million people file for bankruptcy each year, and it’s not because they are bad people. Bankruptcy is a solution that can help good people through a bad time. Many people whose names you might recognize have filed bankruptcy: Walt Disney, Henry Ford, Charles Goodyear, Milton Hershey, H.J. Heinz, P.T. Barnum, President Thomas Jefferson, President Abraham Lincoln (twice), President Ulysses S. Grant and President William McKinley.

5. You can pick and choose what to put into bankruptcy.

Not true. You have to list all of the debts that you owe and property that you own when you file for bankruptcy. If you want to continue paying a certain creditor after filing for bankruptcy you can do that, but it is illegal to not disclose all of your debts when filing a bankruptcy petition.

6. It’s hard to file for bankruptcy.

Not true. There is a lot of paperwork involved, but competent assistance can remove unnecessary guesswork and make the bankruptcy process much smoother.

7. You will never be able to own property again.

Not true. After filing for bankruptcy you will be able to own whatever you can afford. If you have the money no law prevents you from buying anything you want after your bankruptcy case. (Of course, you could still have to qualify for a loan – on that point, see Myth # 1.)

8. Both you and your spouse have to file bankruptcy together.

Not true. You can file together if you want to, but there is no law that requires both of you to file for bankruptcy together. For example, if most of the debt is in just one spouse’s name, it might make sense for that person to file bankruptcy alone.

9. You can only file for bankruptcy once.

Not true. There is no limit on how many times someone can file bankruptcy. However, an individual would have to wait between two and eight years after the first case to receive a discharge in a second bankruptcy case. (Many people think that the wait is seven years or ten years. There is no such waiting period.)

10. Filing bankruptcy causes more family trouble and divorce.

Not true. Usually, the problem is not the bankruptcy filing, but rather the financial stress that comes from not being able to pay your bills on time. Filing for bankruptcy might be the solution to your situation, not an additional problem. If your experience is like that of other couples, you might find that filing for bankruptcy can give your relationship a breath of fresh air, free from the stress of excessive debt.