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Bankruptcy information and tips: 10 myths about chapter 13 and chapter 7 bankruptcy
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Bankruptcy information and tips: 10 myths about chapter 13 and chapter 7 bankruptcy
Similar to most of the big and bad scary things, bankruptcy has a reputation based on a few tidbits of truth and lots of embellishment. Bankruptcy is not as frightening once you know the truth. The sole purpose of this article is to list the misconceptions about bankruptcy.
- Even the guy near the wending machine will know I've filed for bankruptcy: Unless you are a VIP or a big corporation, and filing is picked up by the media, chances are very good that the only group of people who will be aware are your creditors. Bankruptcy is a public legal proceeding, but the number of people filing are so massive, very few publications will have inclination and manpower to run all of them.
- All my debts will be wiped once I file for Chapter 7 bankruptcy: Completely false. There are different types of debt that cannot be erased. They include alimony, child support, student loans and debts incurred as a result of fraud. If you have defrauded someone and a judgement has been made against you, that won't erase the debt either.
- I will lose everything I currently have: This is a complete misconception and keeps individuals from filing for bankruptcy. People feel that all they own will be lost and they will have to start all over again. Bankruptcy laws have exemptions that protect certain types of assets such as your house, car and retirement accounts as well as household goods and clothes.
- It is very hard to file for bankruptcy: It is not at all hard. You will not even need an attorney. However attorneys can give you one on one guidance for your individual case and is highly recommended.
- If you are married, both the spouses need to file for bankruptcy: Not necessarily. Sometimes only one spouse will have significant debt in their name only. However, if the both the spouses share any debt, they will need to file jointly for bankruptcy. Otherwise, the creditor will demand payment of the entire amount from the spouse who did not file for bankruptcy.
- I will never get credit again: Completely not true. Infact it won't be long before you start getting credit card offers again. However, in most cases, the interest rates will be higher. Loans for a house and car become difficult to get. If you have a credit card with zero balance when you file for bankruptcy, you do not have to list the creditor since you do not owe any money. Simply put, you can keep the card even after the bankruptcy.
- I do not want to include certain creditors in my filing since I intend to pay them some day. Bankruptcy is an all or nothing deal so you have to include all your creditors in the petition.
- Filing bankruptcy will improve credit rating since all the debts have been wiped out. Filing for a bankruptcy is the worst entry you can have on your credit report. Bankruptcy can stay for as much as a decade on your report.
- You can file for bankruptcy only once: Once every six years, you can file for a Chapter 7 bankruptcy. Chapter 13 reorganizations can be filed more often than that. It is important to note that you cannot have more than one case open at the same time.
- Before bankruptcy, I can max out all my credit cards: That's called fraud. Bankruptcy judges can get really cranky about it. All your purchases just before bankruptcy will be reviewed.
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