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EXPOSING MYTHS ABOUT BANKRUPTCY
Most people believe that they will lose everything
they have
and will never get credit again. This is based mostly on fear
and little on facts. Bankruptcy myths also arise from the
history of bankruptcy and the legal complexity and subtle
variations in the process. These misconceptions make most
people who would benefit from it the most, avoid it. Here are
some examples.
1. It's really hard to file
for bankruptcy.
It's really not. Though is true that there is a lot of paperwork
involved, having a knowledgeable attorney representing you, makes
the process much smoother. Filing bankruptcy is even electronic
these days, which minimizes paperwork on your part.
2. When I file for bankruptcy
I will loose everything I own.
This is usually one of the biggest fears that most people have
about bankruptcy and the thing that discourages them from filing.
Most believe that the government will come into your home and
take or liquidate everything you have and you will have to start
from scratch. In fact, you may be able to protect many of your
essential possessions when you file for bankruptcy.
3. I will never be able to
get credit or credit cards again.
This is the biggest of the misconceptions people have about bankruptcy.
The truth is this is quite the contrary! It won't be long before
you're getting credit card offers again. They may be from sub-prime
lenders that will charge higher interest rates. Since these credit
cards are some of the easiest to get, you have an opportunity
to start over with this types of credit and you can work your
way back from there.
4. Everyone will know about
my bankruptcy.
There is a belief that everyone they know and those they don't
will know they have filed for bankruptcy or are about to. It is
true that the record of your bankruptcy is not hidden from the
public, yet unless you are a well-know individual, such as a prominent
public figure or a major corporation and the filing is picked
up by the media, most likely the only ones who will know about
it are your creditors!
5. I can only file for bankruptcy
once.
Filing for bankruptcy does not make you ineligible to file again.
The bankruptcy code allows a debtor to file for bankruptcy more
than once, but you are limited as to when you can file for it.
You can only file for Chapter 7 bankruptcy once every 8 years.
6. Only deadbeats file for
bankruptcy.
Bankruptcy is a means for good people who are going through bad
times to get relief. Many people file for bankruptcy after a life-changing
experience, such as a divorce, the loss of a job or a spouse.
Sometimes even a serious illness has made it hard for those who
keep struggling to pay their bills and debts for months until
the realization sets in that they need help.
7. Bankruptcy will wipe out
all my debts.
It is not true that all your debts are simply wiped out. When
property loans or car loans are secured by assets such as your
house or car, those loans will normally remain in place if you
chose to preserve these items. There are other debts that will
remain in place such as student loans, debts that occurred as
a result of fraud, child support, alimony and some debts you have
been ordered to pay to someone who sued you by a judge.
8. I can max out all my credit
and credit cards and not have to pay for any of those things.
This is not true. It is called credit fraud and a bankruptcy judge
will be irritated and most likely sanction you for this! The trustee
in your case will review all your purchases before your filing.
If fraud is suspected, this will most likely result in severe
sanctions! You could put any protection you are entitled to with
a bankruptcy in jeopardy!
9. Both my spouse and I have
to file bankruptcy together.
Not true. You can file a bankruptcy case without your spouse joining
in the filing. In many cases it makes sense for husband and wife
to file together, but in some instances on spouse might not want
to file. This is absolutely fine and definitely allowed by the
court.
10. I don't need to file bankruptcy
because I'm unemployed and my debts are uncollectible.
For some, this is true. If you have no assets and no income, your
debts are uncollectible. However, you may want to file bankruptcy
anyway to stop creditor's harassing collection efforts. And while
you may be unemployed now, when you go back to work your creditors
could garnish your wages. Your creditor can sue you for five years
and collect against you for another twenty years after that.
11. If I file, I will lose
my job or not get a new job.
This is not true. Your employer cannot legally discriminate against
you because you have filed for bankruptcy. It is also illegal
for a company to refuse to hire someone who has filed. A current
employer can check an employee's or potential employee's credit
report only if they have the employee's written permission.
12. I can't get rid of back
taxes through bankruptcy.
Generally speaking, this is true. However, there is such a thing
as tax bankruptcy. To qualify, you have to file all your returns
and you can only get rid of income taxes that are more than three
years old. In addition, sales taxes must be repaid and cannot
be wiped out by filing bankruptcy.
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