With all the economic troubles individuals and businesses face today, myths about bankruptcy seem to be circulating. Here are a few of my favorite:
Myth 1: You will lose everything you have if you file for bankruptcy. Nothing could be further from the truth. Most people are able to keep everything they own. Debtors in bankruptcy are entitled to exempt most assets including: houses, mobile homes, land, cars, trucks, household goods and furniture, wages, life insurance cash value, personal injury and worker’s compensation claims, tools of trade, retirement plans, IRA’s, and the list goes on, however, not all assets are exempt for the full value of the asset.
Myth 2: You will never get credit again after bankruptcy. That’s simply not true. Unfortunately, some credit companies are eager to offer you credit right after bankruptcy. But beware, not to fall into that trap again! Usually, you can reestablish credit 2-4 years after a bankruptcy. It depends mostly on what you do after the bankruptcy.
Myth 3: Filing bankruptcy will hurt your credit for 10 years. A bankruptcy will appear on your credit report for up to 10 years. However, it does not mean it will hurt your credit for 10 years. Just because something is reported on your credit report does not necessarily mean it will have a negative effect on your credit standing. In any event, by the time someone needs bankruptcy protection, the “credit” is already damaged by heavy debt and/or late payments, etc.
Myth 4: You can pick and choose which debts and property to list in your bankruptcy. No, you cannot. Bankruptcy laws were created to give debtors a fresh start and creditors fair treatment. Therefore, the bankruptcy laws require that all debt and assets be included. If you want to keep paying on a debt after bankruptcy you can. In fact, there are some debts you will have to pay, such as a car loan or home loan, if you want to keep those assets.
Myth 5: It’s really hard to file for bankruptcy. This myth started circulating around 2005 when the bankruptcy code was amended. Credit card companies want people to believe that it is hard or even impossible to get rid of credit card debt in bankruptcy. That’s simply not true. It’s done all the time for people who truly cannot repay the debt.
For a free initial consultation regarding these and other related issues, please contact attorney & financial counselor; Susana B. Tolchard at 661-287-9986.