Ask a Philadelphia Bankruptcy Attorney: 10 Common Bankruptcy Myths

Bankruptcy myths unfortunately cause people to hold back from filing bankruptcy. There are at least 10 facts that people do not realize.  In fact, most people have at least some wrong information about bankruptcy. Well meaning and well intentioned friends, family members and co-workers often supply some of the wrong information perpetuating the myths about bankruptcy. We hope that by giving you the facts about bankruptcy we can help you to determine whether bankruptcy is the right course of action for you.

Myth 1: Bankruptcy is difficult

While there are many rules in bankruptcy and the process may seem confusing, it is not so difficult that you should avoid the benefits which bankruptcy can provide you. If you have a competent and experienced lawyer representing you, you should feel comfortable. The process should be straight forward for most individuals. Many people have commented they would have filed earlier if they only had really known what was involved in the bankruptcy process.

Myth 2: If I file, I will lose all my property and everything I have.

Not true. Because of several exemptions built into the bankruptcy law, most people who file for bankruptcy protection do not lose any property at all. Those with nonexempt property can usually keep their property if they agree to pay back some or all of their debt. Remember that the bankruptcy laws were written to help people, not hurt them.

Myth 3: If I file, I will never get credit again.

It is possible to rebuild your credit after filing bankruptcy. When a person is already in need of filing bankruptcy, their credit report is usually in bad shape. in fact in many cases filing bankruptcy will improve your credit report.

Some companies have actually targeted people who have filed for bankruptcy. Their reason is simple; the person’s old debts have been taken care. With no debts, this person can become a good user of credit so let him or her start fresh with our company.

Myth 4: If I am married, both spouses must file together.

Not true. One spouse can file without the other spouse. In Fact, in many cases it makes sense for only one spouse to file. We have filed hundreds of cases where a husband or a wife, but not both have filed Bankruptcy.

Many spouses actually ask their husband or wife to not file bankruptcy out of this misplaced fear.  Hundreds of thousands of people file bankruptcy without having their spouse join in filing.

Myth 5: My bankruptcy will hurt my spouse’s credit.

One of the bankruptcy myths Philadelphia residents worry about concerns what happens to their spouse. When one spouse files for bankruptcy protection, his or her spouse’s credit is generally not affected. This is true whether you file for bankruptcy chapter 7 or bankruptcy chapter 13

Myth 6: Bankruptcy will not help me because I owe taxes.

Another bankruptcy myth versus fact is bankruptcy cannot help at all with income taxes. While it is true that some taxes will not be discharged, others can be. There are many rules concerning taxes which an attorney can explain to you including repayment of only a portion of the taxes owed. Some of the rules depend upon the type of income taxes that are owed.  Others rules depend upon the age of the taxes and if tax returns were filed.

Real Estate taxes can be paid back through a Chapter 13 Plan.  The plan will give you up to five years to pay delinquent real estate taxes.

Myth 7: Only deadbeats file bankruptcy.

Not true. Most of the people who file for bankruptcy are good hardworking people. Congress didn’t create the bankruptcy laws to help the bad guys. When good people have serious financial problems, they owe it to themselves and their families to consider bankruptcy. Good people, who realize that they have a duty and a responsibility to put their families first, file bankruptcy.

You’re completely wrong if you think that you’re a deadbeat if you file for bankruptcy. If you need to file, filing bankruptcy is actually one of the most positive, responsible and honest steps you can take on behalf of your family.

Myth 8: Many people think you can only file bankruptcy once in a lifetime.

Under the new bankruptcy laws, it is more difficult to file multiple times, but it is definitely still possible.  You have no idea of how many people file bankruptcy a second time or third time. People don’t plan to file bankruptcy.  Job loss, divorce, illness, unexpected expenses, financial mistakes are just come of the causes.  These issues can happen much more than one time during a person’s lifetime.

Myth 9: You can pick and choose which debts and property to list in your
Bankruptcy.

Sorry, but you can’t. It is against the law. When you file Bankruptcy you must list all your property and all your debts. Many people want to leave out a debt because they want to keep paying on it. With a car, truck, or home mortgage or loan, you can keep making the payments every month, and as long as you keep the car or property properly insured, the creditor will accept your payments.

In some circumstances, we are able to reduce your mortgage and/or car payments.  This is done by by paying the same through a Chapter 13 Plan. Many people have no idea that this benefit even exists under the bankruptcy process.

Myth 10: Even if you file for bankruptcy, creditors will still harass you and your family.

Nothing could be further from the truth. The minute your bankruptcy case is filed, the Bankruptcy Court issues an order telling all of your creditors to leave you alone, or else. This order is called the “automatic stay”. This Order prohibits creditors from taking any action against you. Even better, if a creditor violates the automatic stay, you have the right to bring the creditor before the Bankruptcy Court and seek sanctions and compensation from the creditor for violating the “automatic stay”.The Bankruptcy Judges have an extreme dislike for creditors who violate the bankruptcy laws.

Bankruptcy myths hold people back from filing for bankruptcy. You will learn what are bankruptcy facts and myths when it comes to filing bankruptcy. To get the facts about bankruptcy and learn about your personal bankruptcy options Call the Law Offices of David M. Offen at (215)625-9600.