Commonly Asked Bankruptcy Myths
No area of law is more fraught with myths than bankruptcy law. When you are considering filing you will hear all kinds of bankruptcy myths – information which is half-true, misleading or outright false. Like a mythical mermaid which some say lure a sailor to their deaths, and others say are angels of the deep, bankruptcy tales vary and grow with lore each time they are told.
Here are some of the most common bankruptcy myths I have heard:
Bankruptcy Myth No.1: The Bankruptcy Trustee Will Take Everything
No, the Trustee will not come into your home, take an inventory and force you to sell all your belongings. Filing for bankruptcy will not automatically result in you losing your possessions. Under Chapter 7 petitions, your assets can be seized and sold. The exemption laws of your state set forth what personal property is ‘protected‘ and cannot be seized. As far as legal proceedings go, Trustees are usually very caring and understanding individuals who have spent their careers practicing bankruptcy law. The only time most debtors come in contact with a trustee is at the 341 Hearing where they question the debtor, usually only lasting approximately 5-10 minutes.
Bankruptcy Myth No.2: Both Spouses Have To File For Bankruptcy
It is not uncommon for one spouse to have significant debt that is in their name only. Where debts are in both names, the non-filing partner could still be sued for the outstanding debt. If all the debts are in one name, then that is the only person necessary to file. Again, talk with your bankruptcy attorney at the beginning of the case to determine if it is in your interest to file a bankruptcy petition together.
Bankruptcy Myth No. 3: I Will Never Get Credit Again
Most people are amazed by the volume of offers for credit cards they receive after they file for bankruptcy. Most of these offers will be from subprime lenders who will provide credit at incredibly high rates, but you will have access to credit. With this access comes the real possibility that you will run into financial problems again. Talk to us about how to responsibly re-establish your credit.
Bankruptcy Myth No. 4: All My Debts Will Be Gone
No, Certain types of debts cannot be discharged, or erased. They include taxes, child support and alimony, restitution for a criminal act and debts incurred as the result of fraud, as well as the majority of student loans. Talk to your bankruptcy attorney about the types of relief you can expect and what debts will live on after your filing.
Bankruptcy Myth No. 5: I Am A Failure
Filing for bankruptcy is NOT a personal failure. The most common reasons people file for bankruptcy include job loss, major medical crisis, the death of a partner, or divorce. I practice bankruptcy law because I want to help people through tough financial times, and a fresh financial start may be the answer to help someone experiencing a traumatic and horrible event in their life. Everyone deserves a fresh start; a chance to start over and take control again of their financial future and security.