As the saying goes, you can’t believe everything you hear. Many myths about bankruptcy are being spread in our culture. Here is a myth-busting guide that dispels common rumors circulating in the public.
Filing for bankruptcy hurts your credit
A bankruptcy remains on your credit report for up to 10 years. However, if you stay current with your bills moving forward, you can rebuild your credit faster than you think.
You will lose everything you own.
Bankruptcy allows you to keep your property. Although state laws vary, every state has exemptions that protect certain property, such as your home, car, household goods, and retirement savings.
All Your Debt is Forgiven
Certain debts still require payment, such as student loans, child support, and alimony. Most tax debts, especially those from the past three years, are not dischargeable. Unsecured credit card balances and unsecured medical expenses are typically dischargeable.
You can never get credit again.
Filing for bankruptcy actually gets rid of debt and makes you more attractive to banks, credit card companies, and other lenders. However, you’ll often have to pay higher interest rates and put down a larger down payment. You can start rebuilding your credit faster if you stay employed, pay the bills, and start saving money.
You can pick and choose what to put into bankruptcy
This isn’t true. You must list all the debts you owe and the property you own.
You can never own property again
No laws are preventing you from buying homes, vehicles, or household furnishings in the future. You’ll be able to purchase whatever you can afford.
You can only file for bankruptcy once
There are no rules regarding how often you can file for bankruptcy. However, there are limits to how many times you can receive a discharge. Typically, the time period for Chapter 7 is once every 8 years, and for Chapter 13, every two years. There is no waiting period if your prior bankruptcy case was “dismissed” as opposed to “discharged.”
Everyone will know I filed for bankruptcy
Bankruptcy is a public record, but it’s unlikely that people will go around checking for your name. If you’re a prominent official or a celebrity, that’s another story.
People who file for bankruptcy are ‘bad people.’
Most people who file for bankruptcy are honest, hard-working people who are going through a difficult time. An average of 500,000 people file for
bankruptcy in the U.S. every year, and it’s usually done as a last resort.
Bankruptcy causes divorce
Bankruptcy eliminates debt and financial stress. It’s a solution to the problem you and your family are facing. The absence of financial stress usually benefits a relationship.
Filing for bankruptcy will impact employment
Federal law protects current employees from being fired, demoted, or discriminated against solely because they filed for bankruptcy. Federal, state, and local governments are also prohibited from considering bankruptcy in hiring decisions. Some private employers in the financial sector may consider bankruptcy as part of their search for candidates.
It’s hard to file for bankruptcy
A skilled, experienced attorney can make the task of filing for bankruptcy easier. You can file yourself, but it’s definitely not recommended. It’s best to consult with an attorney first to discuss your options. The Law Office of Todd Cushner & Associates can help you every step of the way. Contact us to schedule a free consultation.
