Exposing the Myths About Bankruptcy

Millions of people file bankruptcy each year. Before you formulate an opinion about bankruptcy, read through the following false statements about bankruptcy:

1. You Will Never Get Credit Again. [NOT TRUE] While past credit history is taken into account when you seek new credit, the most recent credit history often counts more than the past. If you already have very high balances, late payments, collections and charge offs, filing bankruptcy can improve your credit scores.

2. You Can Pick and Choose Which Debts to Include in a Bankruptcy. [NOT TRUE] All debts must be listed in a bankruptcy case but this does not mean all those debts will be discharged. If a debtor fails to include all information, the bankruptcy case is at risk for dismissal. So, it is crucial to make a comprehensive list of all debts when preparing to file bankruptcy. It is recommended that you review your recent credit report as well so that you do not overlook any creditors when preparing your paperwork.

3. Late Payments are Better than Filing for Bankruptcy. [NOT TRUE] Both late payments and no payments can harm your credit. However, maintaining bad debts on your credit report lowers your credit score and can do more harm by remaining in your current credit history as they continue to report in late as each month goes by. A Chapter 7 or a Chapter 13 Bankruptcy both affect your credit score, but, the damage to your credit score is not as bad as you think. Bankruptcy lets you start clean so you can begin to rebuild your score over time and it instantly improves your debt to income ratio which is another critical indicator of your ability to repay a debt when applying for new credit.

4. Bankruptcy Is No Longer Available or Is Illegal. [NOT TRUE] While there have been some changes in the bankruptcy laws in the past few years, you still have a legal right to file and obtain protection from your creditors.

5. People Who Have a Job Cannot File for Bankruptcy. [NOT TRUE] Whether you have a job or not, if you cannot pay your bills you are entitled to file bankruptcy. In fact, in order to file for Chapter 13, you must have a job or some sort of regular income in order to fund the repayment plan.

6. My Medical Bills Cannot Be Wiped Out. [NOT TRUE] Medical bills are one of the main reasons people are forced into bankruptcy and they can be discharged just like other debts.

7. If You File Chapter 13, You Have to Repay Everyone in Full. [NOT TRUE] The type of repayment plan that you propose under a Chapter 13 filing will vary based upon each individual filer. The filer’s income, total assets, exempt assets and total debts will be figured into determining who gets paid and how much gets paid back.

8. You Will Lose Everything You Own. [NOT TRUE] In most cases, you can keep all of your property. Mississippi law allows individuals filing for bankruptcy to keep a certain amount of property, including your residence, vehicles, household goods, retirement accounts and pensions. It is important you speak with an experienced bankruptcy attorney early on to learn what you can keep before you drain your accounts and start selling or disposing of your goods.

9. You Have to Have a Certain Amount of Debt to File Bankruptcy. [NOT TRUE] There is no required amount of debt for a person to owe in order to qualify for bankruptcy filing. If you are unable to repay your debts, you can file.

10. Your Creditors Will Still Harass You. [NOT TRUE] Under bankruptcy law, creditors must stop calling and harassing you once you have filed for bankruptcy. If a creditor does not follow these rules, you have options to seek damages against the creditor. So, once you have filed for bankruptcy, your creditors stop bothering you completely.

11. Everyone Will Know You Filed. [NOT TRUE] Unless you are a very prominent person or a celebrity, chances are the only people that will know you filed for bankruptcy will be your creditors, or people you tell.

12. It is Really Complicated to File for Bankruptcy. [NOT TRUE] While this is true for the amount of work your bankruptcy attorney will have to do, your bankruptcy attorney will walk you through the process, ensuring that you follow the requirements, making things as simple as possible for you.

If you have been told something about bankruptcy that has you concerned or you are not sure if it is true, give me a call or email me your question at frank@coxwellattorneys.com. I’ll be happy to let you know if you are dealing with fact or myth!