Clear-A-Debt - 12 Myths about Bankruptcy
12 Myths about Bankruptcy
Like most big, bad scary things, bankruptcy has a reputation
based on a few tidbits of truth and lots of embellishment. And
like most creepy crawlies, it's not nearly as frightening once
you know the truth.
With a mind toward declawing the monster, here are a dozen
misconceptions about bankruptcy<
/b>:
1. Everyone will know I've filed for bankruptcy.
Unless you're a prominent person or a major corporation and the
filing is picked up by the media, the chances are very good that
the only people who will know about a filing are your creditors.
While it's true that bankruptcy is a public legal proceeding,
the numbers of people filing are so massive, very few
publications have the space, the manpower or the inclination to
run all of them. 2. All debts are wiped out in Chapter 7
bankruptcy.
You wish. Certain types of debts cannot be discharged, or
erased. They include child support and alimony, student loans
and debts incurred as the result of fraud. It's also very
unlikely that a judge will discharge legal settlements you've
been assessed, such as money you've been ordered to pay to
someone who sued you. 3. I'll lose everything I have.
This is the misconception that keeps people who really should
file for bankruptcy from doing it, says Chris Viale, chief
operating officer of Massachusetts-based Cambridge Credit
Counselling Corp.
"They think the government will sell everything they have and
they'll have to start over in a cardboard box," Viale says.
While the bankruptcy laws vary from state to state, every state
has exemptions that protect certain kinds of assets, such as
your house, your car (up to a certain value), money in qualified
retirement plans, household goods and clothing.
"For most people, they'll pass through a bankruptcy case and
keep everything they have," says John Hargrave, a bankruptcy
trustee in New Jersey. If you have a mortgage<
/a> or a car loan, you can keep those as long as you keep making
the payments (like the rest of us). 4. I'll never get
credit again.
Quite the contrary. It won't be long before you're getting
credit card offers again. They'll just be from subprime lenders
that will charge very high interest rates. "There are
innumerable companies
that will provide credit to you," says California
bankruptcy attorney and trustee Howard Ehrenberg. "I don't
advise any of my clients to run out and run up the bills again,
but if someone does need an automobile, they can go and will be
able to get credit. You don't have to go underground or
something to get money."
However, if you're planning to buy a house or a car, you might
want to do that before you file. Those loans will be tough to
get and the higher interest rate on such a large purchase would
make a significant impact on your payments. Also, 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. That means, you might be able to keep
that card even after the bankruptcy.
5. If you're married, both spouses have to file for
bankruptcy.
Not necessarily. "It's not uncommon for one spouse to have a
significant amount of debt in their name only," Hargrave says.
However, if spouses have debts they want to
discharge that they're both liable for, they should file
together. Otherwise, the creditor will simply demand payment for
the entire amount from the spouse who didn't file.
6. It's really hard to file for bankruptcy.
It's really not. You don't even technically need an attorney.
However, it's not recommended to go through the procedure
without one.
7. Only deadbeats file for bankruptcy.
Most people file for bankruptcy after a life-changing
experience, such as a divorce, the loss of a job or a serious
illness. They've struggled to pay their bills for months and
just keep falling further behind. 8. I don't want to
include certain creditors in my filing because it's important to
me to pay them back someday and if the debt is discharged, I
can't ever repay them.