Top 10 Bankruptcy Myths Explained

Myth 1: My credit will be hurt for 10 years after filing for bankruptcy.

This is not true, most people will actually see their credit score increase in the years following a bankruptcy filing. The actual bankruptcy filing stays on a credit report for 10 years, but if you keep your bills current following a bankruptcy filing and make sure your credit report is accurate you should see improvement on your credit score in as little as two years.

Myth 2: Both spouses need to file bankruptcy together.

You do not have to file bankruptcy with your spouse.  However, unless you are seperated and living together both spouses will need to complete the bankruptcy questionnaire in order to determine your household income. There may be ways to protect one spouses credit while saving your home with a single bankruptcy filing. During your free consultation we can review your specific circumstances to decide what is in your best interest.  

Myth 3: Creditors can still contact me after filing for bankruptcy.

Creditors must stop all contact with you immediatly upon filing bankruptcy. This means that while the bankruptcy is pending there can be no harassing phone call, no collection letters, and no lawsuits.  The automatic stay shields you from all collection activitity and gives you peace of mind that you are finally getting your debt put behind you.

Myth 4: I will lose my property after filing for bankruptcy.

 
The fact is that most people are able to retain all of their property even after filing bankruptcy.  In many cases our bankruptcy clients find that their assets are exempt pursuant to the bankruptcy code.  It is important to contact an experienced bankruptcy attorney to ensure that you are taking advantage of all available exemptions. Although in the end most people are able to keep most of their property it is not an automatic occurence.  In fact, Florida has one of the best homestead exemptions in teh country, but has one of the worst personal property and vehicle exemptions.  You should speak with an experienced bankruptcy lawyer to understand your options. 

Myth 5: I will never be able to get another credit card or loan.

The truth is many people find it easier to get credit after they file bankruptcy. Many people mistakenly believe that they will not be eligible for any type of credit after filing bankruptcy, more often the opposite is true.  Once debts have been discharged for a period of time, the process of credit restoration can begin.  In fact, some have estimated that a bankruptcy may actually help your credit in the future, thus making credit more accessible in the future.  In some cases, clients receive credit card offers in the mail only two months after receiving their discharge.  While the rebuilding of credit takes time and effort on the part of the debtor, bankruptcy is not a credit death sentence.  We will show you specific steps that you can take to help rebuild your credit you file bankruptcy.

Myth 6: I can only file bankruptcy once. 

Not True. You can file for bankruptcy relief more than one time if you meet certain conditions. So that we can advise you regarding the availability of bankruptcy in your particular circumstances, you must disclose any prior filings to us.  Remember that we are here to help you and we must have accurate and complete information to assit you. For people that are barred from filing an additional bankruptcy for a period of time we offer consumer protection services that can protect you and stop the creditor calls without filing bankruptcy.

Myth 7 : All my debts will be eliminated if I file Chapter 7 bankruptcy.

Many types of debt can be erased. However, child support and alimony, student loans, certain taxes and debt incurred fraudulently cannot be eliminated.  We will discuss with you in detail which debts will be eliminated and any debts that may be a problem.

If you are seriously considering filing for bankruptcy protection, you may wish to consult a reputable and experienced bankruptcy attorney who can help guide you through the confusing and complicated process.  Having an attorney on your side can provide you with the peace of mind that comes from knowing all your bankruptcy bases are covered.

 Myth 8: I will lose everything I  own.

Not True. The goal of bankruptcy is to protect you and your assets, not to punish you and toss you into the streets. In probably 95% of the Chapter 7 cases, nothing is lost. In virtually all of the remaining 5% of cases, the Debtor knows going into the process that some property will be surrendered either to the Chapter 7 Trustee or to the secured creditor.  Depending upon your situation and what property you are concerned about keeping a Chapter 13 bankruptcy may be the best decision.

If you are behind in mortgage payments and need time to catch up, bankruptcy offers you the chance to reorganize your debts and catch up on the amount you are behind in payments, called “arrears,” over a period of 3-5 years. In a way, the bankruptcy will force the mortgage company to work with you, which is something that we know doesn't happen on it's own.  Go ahead and ask your mortgage company if they will let you catch up on the arrears over a period of 3-5 years interest free.  You and I both know you are about as likely to win the lottery as have your mortgage company do something that will help you. Once in bankruptcy, the lenders have no choice but to cooperate so long as you meet the qualifications and maintain the planned payment arrangement.

 Myth 9 : I will lose my 401(k) or retirement plan.

In almost all cases you can keep your 401(k) if the retirement plan is an ERISA qualified plan. The Employee Retirement Income Security Act of 1974, or ERISA, plans have been determined to be protected or exempted according to Florida exemptions. As a result, you may want to consider bankruptcy before withdrawing money from your 401(k) or pension plan. IRAs are usually protected.  In fact, it is almost NEVER a good idea to withdraw money from your retirement account if you think you may be facing a foreclosure or a bankruptcy.  To discuss what you should do and how to avoid making a huge mistake call to speak to our bankruptcy attorney.

Myth 10 : Everyone will know I filed Bankruptcy.

It is extremely rare that anyone will ever know you filed bankruptcy. Although bankruptcy is a public legal proceeding, it is very unlikely that anyone will find out about your bankruptcy unless they run a credit check on you or have access to the bankruptcy court’s system. With the number of bankruptcy filings over the past few years, most publications do not list bankruptcy filings.

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