Debunking Commonly Asked Bankruptcy Myths

When you are considering filing bankruptcy you will hear all kinds of bankruptcy myths – information which is half-true, misleading or outright false. Bankruptcy tales vary and grow with lore each time they are told. Here are some of the most common myths that I have heard:

1. I will lose everything that I own if I file bankruptcy. FALSE. When you file Chapter 7 bankruptcy your assets can be seized and sold. However, when you apply the exemption laws of your state to the property that you own, the typical debtor can protect all of the assets that he/she owns. This is the most common of the bankruptcy myths that I am asked about by clients.

2. If I am married I have to file bankruptcy with my spouse. FALSE. It is common for one spouse to have significant debt that is in their name only. When one spouse files and there are debts that are in both names, the non-filing partner could still be sued for the outstanding debt.

3. I Will Never Get Credit Again. FALSE. This is one of the most common bankruptcy myths out there. Most people are amazed by the volume of offers for credit cards they receive immediately after they file for bankruptcy. Most of these offers will provide credit at incredibly high rates, but you will have access to credit. 

4. All My Debts Will Be Gone. FALSE. Certain types of debts cannot be discharged. 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.

5. I Am A Failure. FALSE. 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.