Myth #1: Chapter 13 Bankruptcy requires you to pay off all your debts

Not True: Chapter 13 Bankruptcy helps you keep property that you may be behind on (such as houses or cars) and also takes care of unsecured debts such as credit cards, medical bills and personal loans. How much of the unsecured debts you ultimately have to pay back is dependent on your income and your budget – many people pay 0% of their unsecured debts back!

Myth #2: You will be forced to sell everything you own

Not True: The vast majority (95% or more) of bankruptcy cases filed are “no asset” cases, which means that the debtor keeps everything they own. This is possible because of exemptions in the bankruptcy law that provides for the assets that debtors may keep. Additionally, some assets (such as certain retirement accounts) are completely “off limits” for the bankruptcy courts/trustees.

Myth #3: If I file for Bankruptcy it means I am a failure

Not True: The majority of people who file for bankruptcy are honest, hardworking people who have had some sort of life event that has caused them to get behind on their financial obligations. It goes without saying that no one ever really wants to call us but the Bankruptcy laws are here for a reason! Don’t let a lost job, divorce, serious illness or accident keep you from moving forward. Most everyone who comes into our office wants to pay back their debts – they are just not able to and the interest and penalties from these debts just puts them farther and farther behind. We know this is a difficult decision to make and our staff is here to make it as easy as possible for you!

Myth #4: Everyone will know that I’ve filed for Bankruptcy

Not True: It is very difficult for anyone to unearth the fact that you’ve filed for Bankruptcy. Unless you are a public figure or a corporation, this information is difficult to come by. In fact, it is likely that the only people who will know that you have filed for bankruptcy are your creditors and anyone you tell.

Myth #5: The new Bankruptcy laws make it too hard to file for Bankruptcy

Not True: The media hype over the new Bankruptcy laws created a lot of mis-information. The truth is, virtually everyone who could file before the law change is still eligible to file for Bankruptcy. We have more work to do on our end to keep up with some of the extra requirements, but that’s our job! Don’t let the new Bankruptcy laws scare you into thinking that you won’t be able to handle your debts through a Chapter 7 or Chapter 13 bankruptcy filing.

Myth #6: You will never be able to get credit again

Not True: Bankruptcy is not the credit death-sentence a lot of people make it out to be. Actually, since Bankruptcy gets rid of your debt, it puts you in the position of being able to rebuild your credit quickly. Many of our clients begin receiving credit card offers as soon as they are discharged from Bankruptcy and you can even incur certain types of debt while you are in a Bankruptcy (with the Court’s permission). This may not mean that you will get the best rates right away, but if you do nothing at all, your credit will be affected for a much longer period of time. Many people believe that if you just stop paying on a debt it will drop off of your credit after 7 years – this is completely false. A debt does not drop off of your credit until it is paid, settled and paid, or discharged in a bankruptcy and these days creditors are getting more and more aggressive and are selling/transferring your debts to collection agencies who continue to try to collect for a long period of time.

Myth #7: Filing for Bankruptcy will hurt your credit for 10 years

Not True: A Chapter 13 Bankruptcy is listed on your credit for 7 years. A Chapter 7 Bankruptcy is listed on your credit for 10 years. This does NOT mean that your credit will be poor for those 7-10 years. You start re-building your credit as soon as you receive your Chapter 7 bankruptcy discharge (usually 3-4 months after the case is filed), and even while you are in a Chapter 13 because you are showing a positive payment history when you make your monthly Trustee payments.

Myth #8: Creditors can still harass you once you file for Bankruptcy

Not True: Once you file for Bankruptcy creditors are not allowed to contact you – this is a court ordered process called an “Automatic Stay”. Once this is in place, creditors cannot call you at home or at your work. They are not allowed to continue any lawsuits, garnishments, repossessions or foreclosures. In fact, if they do continue to try to collect, you can actually take action against them.

Myth #9: If you’re married, both spouses have to file for Bankruptcy

Not True: If one spouse carries most or all of the debt, it may make sense for just that spouse to file. In this case, the other spouse will not be affected by the filing spouses Bankruptcy. They will, however, still be responsible for any joint debts.

Myth #10: You can’t discharge back taxes in Bankruptcy

Not True: In certain situations, you can get rid of some Income Taxes that are more than 3 years old. Also, depending on the situation, most personal property taxes and inheritance taxes can also be discharged. Property taxes and sales taxes are not dischargeable in a bankruptcy.