People are often wary about filing for bankruptcy, often based on stories they have heard about the process. In most cases, those stories are nothing more than myths and once the air is cleared, they find that bankruptcy is not only not scary, it was the best thing they ever did. Here are ten bankruptcy myths that are just not true.
- Bankruptcy brings shame – this is perhaps the worst myth of all. Bankruptcy is there for a reason – to help people when they need it most. Do you recognize any of these names – they have all filed for bankruptcy? President Abraham Lincoln, Mark Twain, Henry Ford, Francis Ford Coppola, Larry King, Mickey Rooney, Burt Reynolds, Kim Basinger, Jerry Lee Lewis, Wayne Newton, M.C. Hammer, Continental Airlines, General Motors and US Airways (twice).
- You’ll lose your job – the court will not notify your employer of your bankruptcy petition. In fact, you may have several work colleagues who have filed for bankruptcy – you just never know, and they won’t know about yours either.
- You’ll lose everything – the majority of bankruptcy cases now involve debtors with few if any eligible assets. Most people are discharged from bankruptcy having lost nothing but their credit score, and that was on the way down anyway through overdue debts.
- You have to be flat broke to file – income has little effect on your ability to file for bankruptcy. If your income is not large enough to cover your debts, then you may need to file. Your income will determine which Chapter you are eligible to file under.
- You need a lot of debt to file – the amount of debt you carry is not important. As mentioned, it’s whether or not you have sufficient income to service your debts, that’s what’s important.
- Bankruptcy destroys your credit – bankruptcy will affect your credit. In the eyes of some lenders, you’re a better risk after bankruptcy than before. Your credit score will return to normal if you are wise with your future spending and credit activities.
- Your spouse must file as well – another myth is the opposite, you and your spouse have to file separately. The truth is, if you are legally married, then it’s your decision whether to file jointly, or for only one of you to file.
- You’ll lose your house in bankruptcy – you can only lose your home through bankruptcy if you have a lot of debt and a lot of equity in your home. In most states, there are large homestead deductions in place that protect homes. Bankruptcy will stall foreclosure, however, bankruptcy will not clear your mortgage debt. Few people lose their homes because of bankruptcy.
- Bankruptcy will take my pension plan – the vast majority of pension plans are protected in bankruptcy. You may have difficulties if you have drawn large amounts out of your plan, or made very large payments into your plan just prior to bankruptcy, otherwise, your pension plan is perfectly safe.
- Bankruptcy affects citizenship status – bankruptcy has no bearing on your current or future citizenship statues provided there is no fraudulent acts discovered through bankruptcy.
Bankruptcy is fairly easy process if your engage the services of an attorney first. Rather than listening to what others have to say about bankruptcy, get the real facts from a real attorney – remember, every person’s situation is different.