Myths are normally started from a misunderstanding, information that is given incorrectly, or people going off of assumptions. There are plenty of myths regarding bankruptcy, keep in mind that the more informed you are, the better choices you can make for your future. Bankruptcy may not seem as intimidating once you know the truth.

Bankruptcy is No Longer an Option
This is not true, most of the bankruptcy relief offered in the past it still available today. Yes, it is a longer process and a bit more expensive, but it is still an option for those that help in getting a fresh start from their debt.

If you Have a Job, you Can’t File Bankruptcy
The purpose of the means test is to determine what Chapter of bankruptcy is the best option for the filer. If the filer makes above the median income they will be asked to file a Chapter 13 bankruptcy, which requires the filer to have a job.

You Have to Be Behind on Your Bills to File Bankruptcy
This is another myth that we frequently hear from clients. While you should not file bankruptcy if you can actually afford to pay all your bills – there is no rule that says you have to wait till you are actually behind on any or all of your bills.  Many people choose to file bankruptcy upon the sudden loss of a job or reduced income due to retirement, reduced hours or other circumstances – and they choose to file before they actually begin falling behind on their bills.

Credit Card and Medical Bills Cannot be Discharged
The basis of bankruptcy is that all unsecured debt is discharged, this includes personal loans, credit card debt, and medical bills. Do not let creditors try to rewrite the law to you.

Taxes Owed Cannot be Discharged
There are certain taxes (income taxes) that that can be discharged once certain qualifications have been met, along with certain penalties/interest that may have been accrued. It is important to remember that income taxes can be discharged if the qualifications are met.  If you need to obtain relief from income taxes in a bankrutpcy case, it is very important to consult with an attorney that is experienced in these types of case.

If Married, Both Spouses Have to File for Bankruptcy
It is reasonable that if both of the spouses are in debt, then both should file but keep in mind that it is not a requirement. However, if there is no joint debt, then one of the spouses filing should not have any impact the other spouses’ credit score

There is a Minimum Amount of Debt Needed Before you Can File Bankruptcy
The only requirement for the filer to be able to file for bankruptcy is that the filer be incapable of paying their debts with their current monetary income. There is no minimum about of debt needed to be able to file for bankruptcy.  However, an attorney may choose to not accept a case where the amount of debt owed is so low it does not make reasonable sense to file bankruptcy.

Filing for Bankruptcy is a Difficult Process
If you are attempting to file bankruptcy yourself and you have little to no knowledge of bankruptcy laws, it can be quite challenging to file. However, if you have an attorney who has experience with bankruptcy cases it can generally be a simple process.

Everyone Will Know You Filed Bankruptcy
The only people that will know you have filed for bankruptcy are those that are directly involved in the process and those who you hose to tell. It is true that bankruptcy is a public matter, but since there are so many people filing bankruptcy each year unless someone is specifically trying to get information on you, odds are almost no one will know unless you choose to tell them.

You Will Lose All Your Property in Bankruptcy
This is one of the biggest myths that prevents people from filing for bankruptcy. In most cases, the filers were able to keep a very significant portion of their belongings after bankruptcy. As a matter of fact, the vast majority of our Chapter 7 clients never lose any assets in a bankruptcy case due the the generous property exemptions afforded under Georgia and Federal law.  The reason is because there certain exemptions that allow the filer to keep some assets are protected from creditors and bankruptcy trustees, like your pension. A great example is the Chapter 13 Bankruptcy; the purpose of it is to try to allow the filer to keep most of their assets while attempting to pay off as much of their debt as they can.

Bankruptcy is a Sign of Failure
Being unemployed for a long period of time, going through costly divorce, suffering a serious illness, or the costs of supporting different households after a divorce can have a serious financial impact. In some cases some of those in debt made mistakes when they were younger and didn’t know how to budget themselves. Most of these situations are out of the filers control and do not necessarily reflect a failure’s lifestyle. Although some people work hard to repay their debts and try to do the right thing it is possible that some creditors may try to make it difficult for the debtor to fully pay off their debt. It is good to remember that bankruptcy is a viable option for those who want to live a life without being buried in their debt.

Bankruptcy is Bad for Society
Bankruptcy is there to help prevent the buildup of bad debt.  It is easy to imagine how much worse society would be if there was no way for the “honest but unfortunate debtor” to eliminate debt and start over with a fresh start.  Bankruptcy is even contemplated in our United States Constitution.  While credit card companies may lose some money on bankruptcy discharges – this is a calculated loss that is built into the interest rates and fees for everyone’s credit cars.  You can be assured credit card companies still make a profit even if some of their credit card holders have their debt that is discharged.

Credit Will Never be an Option for You Again
This is a false statement because those who are in the process of a Chapter 13 bankruptcy can borrow money and those who have filed a Chapter 7 bankruptcy often get invited to take out a new credit card or are offered car loans, although it is not at the best rate it could be. Once your debt has been taken care of, you are in a position to use more credit. Granted, at the beginning lenders will charge higher interest rates or ask for more money down. However, if you are responsible and smart about managing your finances, you will find yourself in a state of good credit – and usually much faster than you think.

A Bankruptcy Record Will Follow you Around for Life
The point of a bankruptcy is to give the filer a fresh financial start. It is true that a bankruptcy is reported on your credit report for up to 10 years that does not necessarily mean it will negatively affect your credit standing. By the time a bankruptcy case is filed, the filer’s credit is usually in a terrible state, meaning that it will likely be in a significantly better state within a year of a discharge.

I Will Never be Able to Have Property Again
This is statement is entirely false, filing for bankruptcy will not restrict future ownership. You will be able to obtain assets and build a future after bankruptcy.

I Will be Fired from my Job if I file for Bankruptcy
This is untrue.  As a matter of fact, Federal law prohibits firing someone merely because they filed for bankruptcy.  And if you were fired from a job because you filed bankruptcy, you may have a claim for a lawsuit against your employer.