Myth #1: Filing for bankruptcy will ruin my credit for 10 years.
Fact: False. It’s true that a bankruptcy will appear on your credit report for 10 years, but many people are able to restore and rebuild their credit within just a few years after filing for bankruptcy. What normally ruins people’s credit is not the fact that they filed for bankruptcy, but that they did not pay their bills or debts on time. After you have filed for bankruptcy, all of your current debts will be discharged, which means you will have a chance for a clean start. If you pay all of your bills on time and do not fall behind on any payments, you will see your credit score improve, despite the fact that you have a bankruptcy on your credit report.
Myth #2: I will lose my house and car.
Fact: False. Bankruptcy is designed to help people who are struggling with too much debt by alleviating their financial burden. Bankruptcy was not designed to punish people who do not pay their debts by selling their homes or cars. That being said, if the bankruptcy court reviews your list of assets and notices that you are living well-beyond your means, or that you are constantly making purchases you cannot reasonably afford, they may seize some of your assets.
Myth #3: I cannot get new credit after filing for bankruptcy.
Fact: False. Many people are surprised to find that they actually have an easier time obtaining credit after filing for bankruptcy. The reason for this is because prior to filing for bankruptcy, there was a bunch of unpaid debt listed on your credit report. After filing for bankruptcy, the majority of that debt has been completely erased forever. In the eyes of the credit company, you are like a clean slate with no debt. This makes you a more desirable candidate for credit. In fact, it usually takes less than one year or so after a bankruptcy discharge to acquire new credit.
Myth #4: I will never be able to purchase a car or home again after bankruptcy.
Fact: False. Almost all of our clients have been able to purchase a home or car after filing for bankruptcy. It usually takes about two years after bankruptcy before you can purchase a house and even less time to purchase a car.
Myth #5: My spouse will be held liable for my debt.
Fact: This is not always the case, as it will depend on your specific financial situation. The only way to tell for sure if your spouse will be liable for your debt is to consult an experienced bankruptcy lawyer. When you come to our office, we will review both your case and your financial situation, and help you determine how a bankruptcy filing would affect both you and your spouse.
Myth #6: Filing for bankruptcy makes me a bad person.
Fact: Absolutely false. Thousands of good, decent, responsible people file for bankruptcy every year. All it takes is one unexpected incident to throw an otherwise financially secure and responsible person into debt. Family emergencies, unexpected job losses, sudden illnesses, a death in the family, etc can all result in debt. Furthermore, it is much more admirable to take responsibility for your debt through bankruptcy than simply ignoring your creditors and continuing to avoid making payments towards your debt.
Myth #7: The courts will notify my employer of my bankruptcy.
Fact: False. The federal bankruptcy courts will never notify your employer of your bankruptcy discharge. However, bankruptcy is a matter of public record. So if your employer decides to conduct a background check or something of that nature, he or she may discover that you filed for bankruptcy.
Myth #8: My employer can fire me because I filed for bankruptcy.
Fact: False. It is not only illegal, but it’s also unethical for your employer to fire you because you filed for bankruptcy. If you can prove that your employer fired you solely because of your bankruptcy, then you can sue him or her for wrongful termination.
Myth #9: A debt counselor can help me eliminate my debts so I can avoid bankruptcy.
Fact: False. It’s extremely important to understand that debt counselors cannot help you eliminate your debt, and they cannot legally prevent your creditors from abusing and harassing you. The only way to eliminate your debt and prevent creditor abuse is to file for bankruptcy, and the most effective way to file for bankruptcy is to retain the services of an experienced bankruptcy lawyer. The only thing a debt counselor can do is help you manage your existing debt and negotiate new terms for your debt with your creditors. Under no circumstances can they erase or eliminate your debt.
Myth #10: I can go to jail if I don’t pay my debts.
Fact: False. You will not be sent to jail for failing to make payments toward your debt, even if you get sued or a judgment is obtained against you. However, if you have failed to make payments to the IRS you may have problems, especially if your debt to the IRS stems from the fact that you committed tax fraud or tax evasion.
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