Thinking of the consequences of bankruptcy can be stressful. What’s more, those facing bankruptcy often worry about false misconceptions. Creditors work hard to promote old myths of financial ruin so that people don’t file for bankruptcy. In reality, most people who file bankruptcy end up in a stronger financial position afterward. This article is meant to dispel some of these myths. That way, you have the correct information for deciding whether bankruptcy is the right choice in your circumstances.
MYTH #1: Filing Bankruptcy Ruins Credit Forever
This myth is simply not true. While bankruptcy will remain on credit reports for up to 10 years, you won’t necessarily have bad credit for 10 years. That’s because your credit score will reflect post-bankruptcy car payments, mortgage payments, secured credit card payments, etc. Credit can be rebuilt as soon as the bankruptcy is closed and discharged. It is common for most creditors to offer credit right after discharge. We’ve also seen many clients purchase new homes, cars, and qualify for credit cards months after the bankruptcy. Also, taking advantage of counseling can help speed up obtaining credit faster.
Myth #2: Bankruptcy Will Force Me to Lose My Property
This is also false. Bankruptcy does not entitle creditors to your personal assets. In most cases, the debtor’s assets are fully protected from being collected by a creditor. The U.S. Bankruptcy Code allows for exemptions. A knowledgeable bankruptcy attorney can help you understand how the Bankruptcy Exemption Laws would apply to your particular circumstances.
Myth #3: Married Spouses Must File Bankruptcy Together
Contrary to belief, only one spouse can file for bankruptcy. This leaves the other spouse’s credit rating unaffected. In some cases, when a partner enters the marriage with a large amount of debt, having that spouse file for bankruptcy might make sense.
Myth #4: After Bankruptcy, Lenders Will Ignore You
This is not true. In 2005, Congress passed new bankruptcy laws, removing much of the stigma associated with bankruptcy. Lenders understand problems with the economy and how that affects consumers. Many lenders will still offer credit, although the interest rates may be higher.
Myth #5: Bankruptcy Cannot Get Rid of Taxes Owed
Discharging taxes is tricky. While some taxes can be released, others cannot. Getting expert advice from a bankruptcy attorney is best. That way, you can verify the particulars of your case before dismissing the idea of bankruptcy.
Myth #6: Everyone Will Know
This depends. Bankruptcy filings are indeed a matter of public record. However, the number of filings is so large that unless someone is specifically trying to track you down, they won’t find you. That means that unless you are a prominent person or major corporation, the chances that your bankruptcy will be discovered are slim.
Myth #7: You Can Only File Once for Bankruptcy Protection
This is false. A person can file for Chapter 7 discharge once every 8 years. That means that a person could theoretically file for Chapter 7 discharge every 8 years. In cases involving Chapter 13, a person would be allowed to file a Chapter 13 case 4 years after filing Chapter 7.
For more bankruptcy information, our lawyers at the Moorhead Law Group have a demonstrated record of helping those find the road to financial freedom. If you are contemplating whether bankruptcy is the right option for you, contact our office at 303- 586-6912.