Call Today 888.488.8513
Our Blog Offers the Information You Need Let Us Help You Light Your Path to Financial Recovery

Myths About Bankruptcy

"Only deadbeats file bankruptcy."
Nothing could be further from the truth. While there are some filers who blatantly try to defraud their creditors by abusing the bankruptcy system, they comprise a very small minority. The majority of people file for bankruptcy after a life-altering event, such as divorce, illness, death of spouse, or loss of a job. And even after suffering such an event, most people endure years of financial hardship, negative credit, emotional distress, and embarrassment before finally deciding to pursue bankruptcy. While the detractors of bankruptcy continue to look down on the so-called "deadbeats" for filing bankruptcy, most people in this country, including the detractors, are a disaster away from filing bankruptcy themselves.

"You don't have to list all of your creditors in the bankruptcy."
Bankruptcy is an all-or-nothing deal. The code requires that you list all of the creditors to whom you owe money. Even if you choose not to list a certain creditor in your bankruptcy, many creditors will find out through routine checks and will close all related accounts. The unlisted debts will likewise be bound by the bankruptcy discharge. For those wishing to repay their debts in the future, nothing in the code prevents debtors from repaying creditors post-bankruptcy.

"Since I'm going to file, I should max out my credit cards."
Some people think that if you are going to file bankruptcy, you might as well max out your credit cards and reap as much financial benefit as you can. This is fraud, and there are harsh penalties for those who commit it. The U.S. trustee, bankruptcy judges, and other federal officials will levy penalties that include denying discharge, fines, and, in extremely egregious cases, imprisonment.

"You can't file bankruptcy more than once."
In fact, you can file a Chapter 7 "liquidation" bankruptcy once every eight years. For Chapter 13 "reorganization", there is no specified limit. Nonetheless, for repeat filers, the court has the power to evaluate whether a filer is substantially abusing the bankruptcy system. If so, the court may enjoin a particular debtor from filing another bankruptcy.

"If I wait long enough, I won't have to repay my debts and the negative remarks will disappear from my credit report."
I can't tell you how many times clients have told me this. Many people actually take this "head in the sand" approach and wait years for their creditors to go away, only to find out later that the debts have been assigned to collection agencies and/or resulted in civil judgments. Worse yet, the balances have sometimes doubled or even tripled due to interest and penalties. Rest assured, if you owe creditor money today, you will owe them tomorrow, next year, and 10 years from now. Even though there are some statutory limitations that hinder creditors from filing a lawsuit, it does little to stop the aggressive ones from collecting their money. You are much better off in nipping your financial problems at the bud by filing a bankruptcy or settling your debts before they grows out of proportion.

"I won't be able to get credit again for 7 to 10 years after bankruptcy."
If one is already behind on credit card payments, facing imminent judgments, foreclosures, garnishments, etc., he or she is not going to qualify for credit unless these debts are resolved. If he gets any credit at all, it would be at an exorbitant interest rate slapped with other costly loan conditions. Contrary to popular belief, when a debtor emerges from bankruptcy with a discharge, more often than not, he or she is more creditworthy than a person laden with unresolved delinquent loans and judgments. Why? Although both persons would suffer from negative credit, the newly bankruptcy-discharged person has NO debt. No obligations to repay. No pending garnishments, levies, etc.