Top 10 Bankruptcy Myths – BUSTED!
Scroll down or click the links below to see the truth behind some common myths:
- If I file for bankruptcy, it will hurt my credit for 10 years.
- Everyone will know I’m bankrupt.
- The new laws make it too hard to file.
- If I file for bankruptcy, I will never be able to own property again.
- I will lose everything I own.
- If I file bankruptcy my spouse will have to as well.
- Filing for bankruptcy means you are a “failure”, “loser”, “bad person”, etc.
- I have already filed bankruptcy before, I can’t file again.
- I will never have credit again.
- This will cause family issues, maybe even divorce.
Myth 1: If I file for bankruptcy, it will hurt my credit for 10 years.
False. Although bankruptcy stays on your credit anywhere from 7 to 10 years, once your bankruptcy is discharged, you can start to rebuild your credit right away. “Pay all your bills on time and in full” is always good advice, but even more so when you are trying to rebuild credit. Remember – it was NOT paying your bills that got you into bankruptcy. Be careful not to spend more money than you make, and don’t charge more than about 40% of your credit limit on credit cards. For example, if you have a $1,000 credit limit, don’t let your balance on that card get any higher than $400.
Myth 2: Everyone will know I’m bankrupt.
False. Or at least it depends on who you define as “everyone”. Here’s who will know:
- Your lawyer
- The court
- Court personnel
- Your creditors
- People who you tell
There is no published list in the newspaper, no Wall of Shame at your golf club, no loud speaker announcing your name to the world. While it’s true that bankruptcies are a public record, no one is going to go looking, unless perhaps you are a celebrity or running for political office.
Myth 3: The new laws make it too hard to file.
False – If you mean “too hard” as in no one qualifies to file anymore. While you do have to pass the Means Test to qualify for Chapter 7, it isn’t impossible, and even those who do not pass the test may still qualify to file under Chapter 13.
False – If you mean “too hard” as in too complicated. That’s why you have a lawyer! Leave the complicated parts to us.
Myth 4: If I file for bankruptcy, I will never be able to own property again.
False. You will be amazed at how quickly the credit card offers will show up in the mail after your bankruptcy is discharged. There are also sources for loans during your bankruptcy period. You will still be able to buy. Just be careful! Building your credit back up is a good thing – Maxing it back out is NOT.
Myth 5: I will lose everything I own.
False. Filing for bankruptcy actually helps you KEEP your property. Even in a liquidation, most of your property will likely be exempt. View the list of Texas Exemptions, Note: there are some liens that Bankruptcy won’t wipe out, so if you want to keep the property that has the lien, you will still have to make the monthly payments.
Myth 6: If I file bankruptcy my spouse will have to as well.
False. You and your spouse may choose to file together or separately. The law allows one spouse to file while the other does not have to. Talk to your spouse and your attorney and try to figure out what option is best for you.
Myth 7: Filing for bankruptcy means you are a “failure”, “loser”, “bad person”, etc.
False. “Bad things happen to good people.” Just because this is a cliché doesn’t make it untrue. Maybe you lost your job like thousands of others have lately. Maybe you have medical bills that you can’t afford to pay. Maybe you just made some mistakes. Whatever your situation, the fact of filing bankruptcy does not make you a bad person – it just makes you a person going through a bad time.
If you’re curious, click here to see the kind of company you’re in.
Myth 8: I have already filed bankruptcy before, I can’t file again.
False. File away to your heart’s content. BUT, you can only receive a Chapter 7 discharge once every 8 years, or a Chapter 13 discharge once every 2 years. If you have been discharged in a Chapter 7 you have to wait 6 years before chance for discharge in Chapter 13. If you get Chapter 13 discharge, you must wait 4 years to receive discharge from Chapter 7. If you filed, but your case got dismissed, you can file again immediately.
Myth 9: I will never have credit again.
False. Bankruptcy resets your credit. All your credit debt gets wiped away.Think about it from a credit card company’s perspective. Who is the best person to send that credit offer to: a) the person who has thousands of dollars already charged on other cards, or b) the person with no debt at all and a fresh shiny new credit record? They go for the fresh meat. Incidentally, this is why college students get so many credit card offers.
You will get new credit. The key will be to use it wisely and responsibly. Pay your balances ON TIME and IN FULL.
Myth 10: This will cause family issues, maybe even divorce.
False. It has been said that married couples fight over money issues more than any other problem. Imagine the relief to your relationship if all the debt that has been stressing the two of you were taken away. While the decision to file for bankruptcy is painful and difficult, the relief of the fresh start bankruptcy provides may give your relationship a fresh chance as well.