Most of what you think you know about bankruptcy is wrong. Over her 40 years of experience, Julianne Frank, Esq. has heard all of the mythology and fairy tales about bankruptcy. As a result, Attorney Frank shares the top 12 bankruptcy myths below to dispel all of your notions.
Everyone will know I filed for bankruptcy
Unless you're a prominent person or a major corporation and the media publicizes your bankruptcy filing, chances are that the only people who will know about a bankruptcy filing are creditors.
While it's true that bankruptcy is a public legal proceeding, the number of people filing is so high that very few publications have the space, manpower, or inclination to print notices in the media. A public notice does not have to be published, and it may reassure you to know that no local publications in Jupiter post such notice.
All my debts are wiped out in Chapter 7 bankruptcy
Not true. Certain types of debts cannot be discharged, or erased, such as:
- Child support
- Most other divorce-related debt
- Most other government-issued or government-guaranteed student loans
- Fraud-related debts
I'll lose everything I own
While bankruptcy laws vary from state to state, every state has exemptions that protect certain assets, such as your house, car (up to a certain value), money in qualified retirement plans, household goods, and clothing. Florida is one of the few states with an unlimited homestead exemption, meaning that if you have lived in it long enough, you can keep your house, regardless of its value.
I'll never get credit again
Contrary to popular belief, most credit card companies love discharged bankruptcy debtors. Why? There are 3 reasons:
- Debtors can’t file for bankruptcy again for 8 years, putting them in a lower risk category
- Debtors most likely eliminated most of their debt pressure
- People rarely ever file for bankruptcy twice
Keep in mind that you may want to buy a house or car before you file for bankruptcy if doing so is of interest to you. This is because after bankruptcy, obtaining a car and home can be difficult and higher interest rates may impact your payments. Most car and home lenders won’t lend for at least 1 year after debt discharge.
If you're married and choose to file, your spouse has to file for bankruptcy as well
Not necessarily. However, if both spouses have debts they want to discharge, it typically costs the same for one or both spouses to file the same case. If you and your spouse are jointly liable for debt but you file for bankruptcy alone, the creditors will simply demand payment for the entire amount from the spouse who didn't file.
Bankruptcy filing is a difficult process
Done correctly, bankruptcy requires careful care and attention to detail. With the right professional, the process should not be overly painful.
Only deadbeats file for bankruptcy
In her 40 years of legal experience, Attorney Frank has rarely ever experienced prospective debtors who are other than good-intentioned, honest people. Most people file for bankruptcy after a life-changing experience, such as a divorce, the loss of a job, or a serious illness, rather. However, know that debtors who do not intend to pay are often seen as bad bankruptcy candidates.
I get to choose who I list in my bankruptcy filing
Don’t want to include certain creditors in your filing? That is not allowed. You do not get to pick and choose who to list as creditors. If you owe a dime, they are a creditor and must be listed as one of your creditors.
If you have a credit card with a zero balance on the day you file for bankruptcy, you don't have to list it as a creditor since you don't owe any money on it. Not listing the credit card, however, does not mean you will retain credit privileges. Most creditors periodically check your credit and could terminate your card, even if you did not list them in your filing and did not owe them.
Keep in mind that in a bankruptcy filing, you are swearing under penalty of perjury that you have listed all your debts. After your discharge, you can voluntarily pay any creditor.
Filing for bankruptcy will improve my credit rating
While creditors may extend your credit after some time, your bankruptcy filing will appear on your credit report for 10 years, nonetheless. If you have a secured debt such as a car or mortgage payment and stay current post-discharge, your credit score could improve after one year. But know that filing for bankruptcy in itself will not improve your credit rating.
You can't get rid of back taxes through bankruptcy
False! Tax debt is dischargeable in certain circumstances. The rules are complicated, which is why you should discuss your situation with a professional.
You can only file for bankruptcy once
You can file for bankruptcy more than once, but if you file too closely or repeatedly, you may not get the benefits of bankruptcy, such as a stay on legal action or a discharge.
I can max out all my credit before I file
Sure, but you are also likely to have your discharge denied for one or all of your debts.
This blog content is intended for informational purposes only and does not constitute legal advice nor an attorney-client relationship. If you have other questions or concerns about bankruptcy, please call Julianne Frank, Esq. at (561) 220-2528 or contact the firm online!