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Bankruptcy Myths
Myth: People who file bankruptcy lose all their property
Fact: Most debtors do not lose any property. The vast majority of all cases are administered as “No Asset” cases, meaning there are no assets that are both non-exempt and worth enough for the estate to pay the costs of administration. If you do have a large tax refund or other non-exempt asset that may be at risk your attorney can tell you how best to protect it.
Myth: People who file bankruptcy never get credit again
Fact: Many of our clients receive offers for credit before their bankruptcy is even finished! Of course we hope you will throw those away and live on a cash basis choosing to stay off that merry-go-round. But we have had clients purchase homes within two years of their bankruptcy, so credit is certainly available.
Myth: Only deadbeats file bankruptcy
Fact: From experience I can tell you that my clients are in bankruptcy due to job loss, illness, divorce and other economic crisis which may not be within their control. Most debtors would do anything they can to avoid filing bankruptcy and many have already taken out second mortgages in an attempt to catch up, but simply cannot, often due to unreasonably high interest and late fees. In addition you would be surprised that many famous, rich people also filed bankruptcy at some point of their life.
Myth: Banks have lost a lot of money due to bankruptcy filings
Fact: Bank profits from credit cards are at an all time high, over $30 Billion a year. If the banks were truly suffering from bankruptcy losses they would start exercising prudence in lending again instead of giving out credit cards like candy, even to children!
Myth: Bankruptcy “costs” each American family an average of $400 a year
Fact: This figure assumes debtors could pay their bills if they did not file bankruptcy. Banks well know that debtors who need to file bankruptcy do not have the ability to repay. If they did, they would. Even if they did not file bankruptcy they would not be able to pay their debts in full. And everyone knows that those profits would not go back to other credit card users anyway, the banks would keep them.
Myth: There is a minimum amount of debt required to file bankruptcy
Fact: Theoretically you could file bankruptcy even if you only have $500 in debt, although you would need to have your head examined, since it costs more than that to file. But we have had clients with little or no income who have filed for amounts that would be very manageable for those with higher income. There is no minimum.
Myth: I only have to list the debt I want to get rid of on my bankruptcy.
Fact: All debt must be listed, but you can reaffirm debt such as your home, car(s) and other secured loans. You can also simply make voluntary payments to family or medical providers if you wish.
Myth: It is ok to charge up credit cards just before filing bankruptcy
Fact: Debt acquired after you realize you cannot repay may have to be paid back even if filing bankruptcy.
Myth: If you are married and file bankruptcy, your spouse must file too.
Fact: Many married debtors file alone and the spouse is not affected. Unless both are on the debt, a single filing makes more sense. However, the joint income of the spouses must be disclosed on your petition.
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