There are many misconceptions about bankruptcy, here are some of the most common.
Myth #1. Everyone will know I have 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 a filing are your creditors and the people who you tell. While it’s true that your bankruptcy is a matter of public record, the number of filings is so massive, that unless someone is specifically trying to track down information on you, there is almost no likelihood that anyone will even know you filed. However, telling someone that someone else filed bankruptcy is good gossip. Just like telling a someone you heard so-and-so is getting a divorce. So, if you don’t want everyone you know to know you filed bankruptcy you need to keep the information to yourself. As for newspapers our experience is that most papers don’t include information about who filed bankruptcy and even if they did, think about it who would be interested enough to read that stuff?
Myth #2. You will lose everything you have:
Nothing could be further from the truth. The fact is most people who file bankruptcy don’t lose anything. First, while laws vary from State to State, every State has exemptions that protect certain kinds of property. Using Washington as an example: There are exemptions to protect such things as your house, your car, your truck, household goods and furnishings, IRAs, retirement plans, the cash value in life insurance, wages, and personal injury claims. There is even a “wildcard” exemption that can be applied wherever you want it. In those rare situations where you have more property than can be protected by available exemptions there is Chapter 13. In Chapter 13 you can even keep non exempt property through what is known as a ‘liquidation analysis.’
Second, as mentioned above, filing bankruptcy does not generally wipe out liens. Therefore, if you want to keep a car, truck, home or business equipment that serves as collateral for a loan you need to keep paying on the debt. If you make these payments and have exemptions to cover any value above what is owed, you can rest assured
you will be able to keep these items.
Myth #3. You will never be able to own anything again:
A surprising number of people believe this but this is completely false. In the future you can buy, own and possess whatever you can afford. In fact, most of our client’s are back to having good credit within a couple of years after the bankruptcy. How you handle your
credit repair after bankruptcy is up to you, but if you follow our program, chances are you will have good credit sooner rather than later.
Myth #4. You will never get credit again:
Quite the contrary. Filing bankruptcy gets rid of debt and getting rid of debt puts you in a position to handle more credit and this makes you look more attractive to would-be lenders. It won’t be long before you’re getting credit card offers again. At first the would-be lenders will want more money down and will want to charge you higher interest rates. However over time, if you are careful, and keep your job, and start saving money, and pay your bills, and do things that will put good marks on your credit report the quality of your credit will get better and better. Generally, in my experience, if a client has not
re-established good credit in 1 to 2 years it’s not because they filed bankruptcy. It generally means that something else has happened after the bankruptcy to hurt their credit.
Myth #5. Filing bankruptcy will hurt your credit for 10 years:
Not true. Two completely different concepts are getting confused with each other. The fact that bankruptcy is reported on your credit report for 10 years is not the same thing as adversely affecting your credit. Just because something is reported on your credit report does NOT necessarily mean it will have a negative effect on your credit standing.
Let’s get one thing out in the open. By the time you need to make an appointment to see a bankruptcy attorney your credit is already messed up or maxed out, or both. This being the case you have no credit for bankruptcy to hurt.
Furthermore, as I mentioned above, in my experience, if you have not re-established good credit in 1 to 2 years after you file bankruptcy most likely it has nothing to do with the fact that you filed bankruptcy and it certainly has absolutely nothing to do with the fact
that your credit history still shows an old bankruptcy.
Myth #6. If you are married, both you and your spouse have to file bankruptcy:
Not true. In many cases where both husband and wife have a lot of debt it makes sense and saves money for them to both file but it is never a requirement under the law. We have many cases where only one spouse has filed. The good news is that generally if it makes sense for both spouses to file together.
Myth #7. It’s really hard to file for bankruptcy.
NO. IT. IS. NOT! When you hire an experience attorney who can tell you what to do to prepare for your filing, it gets much easier. The decision to file may be a tough one, but once the decision is made, you need only do what the attorney tells you to do. It’s not difficult and is very straightforward. Having a coach and counselor on your side
to guide you through the process makes it a simple process.
Myth #8. Only deadbeats file for bankruptcy:
Not true. The people who file bankruptcy are good, honest, hard-working people, just like you and me, who file as a last resort after months or years struggling to pay the bills that left over from some life-changing experience. Such as a divorce, the loss of a job, a
failed business venture, a serious illness, or some family emergency. Or because they honestly and mistakenly fell into debt at a young age before they knew better, before they knew anything about budgeting or how to manage money.
If that isn’t enought to convince you, consider this, Donald Trump and his casino’s are presently in Chapter 11. United Airlines is in Chapter 11, US Air and MCI have been in Chapter 11. Do you think less of these companies because they filed for bankruptcy? I didn’t think so.
Wrap your head around this factoid. 72% of American’s qualify for bankruptcy relief. That was before our current economic crash. Imagine what that percentage is today? We all live one paycheck away from bankruptcy.
Myth #9. Filing bankruptcy means you are a bad person:
There’s a reason over 1,000,000 Americans file bankruptcy each year and it’s not because they’re bad people. Lots of good, honest, hard-working people fall on hard times. Let’s face it, life can be brutal and sometimes the money’s just not there. The bankruptcy law
were created to make sure you have a way to get free from the burden of debt so that you and your family can have a second chance at a “fresh start”.
Myth #10. Filing bankruptcy will hurt your credit:
Sorry, wrong again. Think about it. By the time you come to a bankruptcy attorney your credit is already either messed up or maxed out. And if it’s already messed up or maxed out how can bankruptcy hurt it?
The big surprise for my clients is when I tell them that filing bankruptcy can actually help them re-build their credit. Bankruptcy gets rid of debt and getting rid of debt puts you in a better position to handle new credit if only someone will give it to you. Therefore
bankruptcy is the first step in the process of re-building your credit.
The truth of the matter is that bankruptcy has very little to do with the algorythms that affect your credit score. In some cases, depending on the circumstances you are in, filing bankruptcy actually raises your credit score right away.
