Sometimes, a fresh start makes
sense. It's important to understand
the facts
and myths
that surround bankruptcy. Like most
scary sounding things, bankruptcy
has a reputation based on a few
tidbits of truth and lots of
embellishment. It's not as nearly as
frightening once you know the truth.
DISCLAIMER:
The
information contained herein is
intended for informational purposes
only. It is not meant as a
substitute for specific legal
advice.
Myth
#1 - Everyone will know I've filed
for bankruptcy.
Unless you're a
prominent person or a major
corporation and the filing is picked
up by the media, the chances are
very good that the only people who
will know about filing are your
creditors. However, it is true that
bankruptcy is a public legal
proceeding. The number of bankruptcy
filings are so massive that very few
publications have the space, time,
or the inclination to run all of
them.
Not true. There
are certain types of debts that
cannot be erased. They include child
support, alimony, student loans, and
debts incurred as a result of fraud.
For example, if you've defrauded
someone, and a judgment has been
made against you, that won't be
erased.
This is a big one.
Many people think that they'll lose
everything after filing bankruptcy.
This keeps many people that should
be filing for bankruptcy from doing
it. While the bankruptcy law varies
from state to state, every state has
exemptions that protect certain
kinds of assets, such as your house,
your car, money in a qualified
retirement plan, household goods,
and clothing. For example, if you
have a mortgage or car loan, you can
keep those as long as you keep
making the payments.
It won't be long
before you're getting credit card
offers again. They'll just be from
subprime lenders that will charge
very high interest rates. While it
is not wise to run out and rack up
bills again, you will be able to go
and buy a car on credit. However, if
your planning on buying a house or
car, you might want to do that
before you file. Also, if you have a
credit card with a zero balance on
it on the day you file for
bankruptcy then you don't have to
list it as a creditor. Chances are,
you may be able to keep that card
after bankruptcy (it's, ultimately,
the lender's decision).
Myth
#5 - If you're married, both spouses
have to file.
Not necessarily.
It's not uncommon for one spouse to
have a lot of debt in their name
only. However, if both spouses have
debts they want to discharge they
should file together. Otherwise, the
creditor may simply demand payment
for the entire amount from the
spouse who didn't file.
Not really.
Technically, you don't even need an
attorney. However, it's strongly
recommended to go through the
procedure with one. You want to make
sure the procedure is done
accurately.
...Then I can file
for bankruptcy, and I have never
have to pay for the things I bought. That's
fraud, and bankruptcy judges can get
really upset about that kind of
action. The trustee in your case
will review all your purchases right
before your filing - he or she knows
what to look for.
Myth
#8 - I don't want to include certain
creditors.
...because it's
important to me to pay them back
someday (ie:. family doctor). And,
if that debt is discharged, I can't
repay them, right? Well, yes. You
are no longer obligated to repay
them, but you always have that
opportunity. If you shall desire to
repay them, then you can. There's
nothing in the bankruptcy code that
prevents you from doing that once
you're back on your feet. But,
bankruptcy is an all or nothing
deal, so you have to include all of
your creditors in the petition.
Most people file
for bankruptcy after a life-changing
experience, such as a divorce, the
loss of a job, or serious illness.
Many have struggled to pay their
bills for months and just kept
falling behind.
You can only
file for Chapter 7 bankruptcy once
every eight years. For Chapter 13
reorganization, you can file more
often than that, but you can't have
more than one case open at the same
time.
