Twelve Myths About Bankruptcy

1. Everyone will know I have filed for bankruptcy.
Unless you are 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 is true that bankruptcy is a public legal proceeding, the number of people filing is so massive that 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.
This is simply not true. Certain types of debts cannot be discharged and erased. They include child support, alimony/maintenance, government-issued or government-guaranteed student loans, and debts incurred as the result of fraud.

3. I will lose everything I have.
New York State has very liberal bankruptcy exemption laws allowing most people to keep their home, car, retirement accounts and personal goods.

4. I will never get credit again.
No, most of our clients have advised us that within six months of obtaining their discharge they are receiving credit card applications, car loans and leases, and within one to two years, most are able to obtain mortgages as well.

5. If you are married, both spouses have to file for bankruptcy.
Not necessarily. However, if spouses have debts they want to discharge that they are both liable for, they should file together. Otherwise, the creditor will simply demand payment for the entire amount from the spouse who did not file.

6. It is really hard to file for bankruptcy.
It really is not, as long as you have the proper legal representation. Using an experienced bankruptcy attorney, your chances at a smooth and successful process significantly increase.

7. Only deadbeats file for bankruptcy.
Absolutely not!  Most people file for bankruptcy after a life-changing experience such as a divorce, the loss of a job or a serious illness, not because they were irresponsible. They have struggled to pay their bills for months and just keep falling further behind.  Bankruptcy allows you to get a fresh start.

8. I do not want to include certain creditors in my filing because it is important to me to pay them back someday and if the debt is discharged, I cannot ever repay them.
While it is a very respectable position, but bankruptcy is an all-or-nothing deal, so you have to include all your creditors in the petition.

9. Filing for bankruptcy will improve my credit rating because all those debts will be gone. 
It is not that the bankruptcy will improve your credit but it often gives you the opportunity to start rebuilding your credit sooner than if you did not file at all.

10. You cannot get rid of back taxes through bankruptcy.
Generally speaking, this is true. However, properly filed taxes that are more than three years’ old from the date they were due, may be discharged.

11. You can file for bankruptcy only once.
You can file for bankruptcy more than once, however, you can only obtain a discharge in a Chapter 7 bankruptcy, one time every eight years.  A Chapter 13 bankruptcy may be filed multiple times, but it is a complicated situation that must be discussed with a bankruptcy professional.

12. I can max out all my credit cards, file for bankruptcy and never pay for the things I bought.
That is called fraud and bankruptcy judges can get really cranky about it. The trustee in your case will review all your purchases right before your filing. The trustee knows what to look for.