7 Myths About Bankruptcy Everyone Thinks is True
When you are faced with mounting debt, dealing with collection calls and struggling to make ends meet, bankruptcy is one of the best ways to get a financial fresh start. Yet, many people resist filing for bankruptcy due to many of the myths that exist about the process and what it will do to the person who files.
These seven myths are some of the most common that people believe and an explanation about why they are untrue.
Everyone Will Know I Filed
Unless you are well-known in your community or the leader of a large company, it is unlikely that anyone will know you’ve filed for bankruptcy except those you owe money to, your creditors.
Bankruptcy is a public legal procedure and there are areas of the country where bankruptcies are printed in the paper, many papers are no longer publishing such lists due to space constraints.
Even those that do print bankruptcy listings do so in very small print, normally in the back of the paper.
People Who File are Financially Irresponsible
“There’s always going to be some kind of abuse, but it’s far more likely that people run into very serious personal problems in one of three areas: losing their job, going through a divorce or suffering a serious illness,” said Walter W. Miller, Jr., who teaches bankruptcy law at Boston University School of Law.
A 2011 survey by the Centers for Disease Control and Prevention found that 20 percent of Americans had difficulty paying medical bills that year.
Although unemployment rates have declined slightly, the unemployment rate is still at 5.1 percent and 2.1 million are considered to have been unemployed long-term.
If You Spend With Abandon Right Before Bankruptcy, You Don’t Have to Pay It Back
If a court determines that you made purchases or borrowed money just before filing, they could determine that you attempted to defraud the court system.
The court could not only refuse to discharge those debts, they could actually dismiss your bankruptcy case completely.
Transferring money or property to family and friends in an attempt to hide it from the courts can lead to you being charged with fraud which could actually lead to an arrest.
Bankruptcy Permanently Ruins Your Credit
Although bankruptcy can remain on your credit report for up to ten years, many who file are able to rebuild their credit fairly quickly.
Within a month or so of filing, you should be able to obtain a secured credit card. If you use the card wisely, paying as agreed, the lender may be willing to extend small, unsecured loans.
Filing Bankruptcy Means You’ll Lose All Your Possessions
In most cases, personal property is exempt from bankruptcy proceedings.
Your home, your vehicle, family heirlooms and tools are often protected from seizure in a bankruptcy case. In addition, the courts review your financial ability to pay creditors once allowable expenses are deducted from your salary which also limits what the courts will require to be used in order to pay your debts.
Bankruptcy Discharges All Past Debts
Not all debts are discharged during bankruptcy. Types of debts that cannot be discharged under bankruptcy as determined by federal law include:
- Certain tax claims
- Debts the debtor does not include in bankruptcy
- Alimony, spousal or child support
- Debts incurred due to willful or malicious injuries to another person
- Governmental fines, penalties or other debts
- Government funded or guaranteed loans or benefit overpayments
- Personal injury payments caused by a debtor’s operation of a motor vehicle under the influence of drugs or alcohol
- Debts owed to certain tax-advantaged retirement plans
- Condominium or cooperative housing fees
Married People Cannot File Bankruptcy Alone
A spouse can file bankruptcy separately for debts that they have incurred in their name alone.
The bankruptcy official may want to see the income of a spouse but the bankruptcy will not affect the credit of the spouse.
Some states may look at jointly held property, but in most cases assets are safe under bankruptcy protections.
If you are facing debt problems, you can end the collection calls and stress. Contact Georgette Miller and Associates today to learn how they can help you get a fresh financial start through bankruptcy. Do not let myths keep you from getting back on your feet.