COMMON BANKRUPTCY MYTHS

There are some strange myths concerning bankruptcy.  Many of these myths are told by well-meaning, but uninformed financial "experts."  Today's post will look at six common myths.

Taxes cannot be discharged in bankruptcy

This myth is based in some truth.  Tax debt is especially hard to discharge, and in some cases the debtor may not discharge tax debt.  The truth is that discharging tax debt often depends on how long you have had the tax debt and what has happened in the meantime.  It is important to speak with an experienced bankruptcy attorney about your circumstances and get competent legal advice.

You lose everything in a Chapter 7 bankruptcy

Everything?  Really?  The truth is that only four percent of all Chapter 7 cases are "asset cases" which is term used to describe a Chapter 7 case where there is an asset owned by the Debtor that will be liquidated by the Chapter 7 Trustee.  In the remaining 96% of cases, the debtor loses NOTHING.  Additionally, secured property like a car or home may be reaffirmed, and the debtor retains the property and continues to pay the debt.

You can lose your job if you file bankruptcy

The federal law prohibits a government or private employer from terminating or discriminating against an employee who files bankruptcy.  It is illegal for your employer to fire you because you filed bankruptcy (click here for more information on this topic).

You can't get credit after a bankruptcy

A bankruptcy discharges unsecured debt and reorganizes your finances.  Bankruptcy can make it easier for you to pay your bills.  Many debtors are able to purchase cars and obtain credit within months after the bankruptcy discharge.  Many others are able to buy a home two years after the discharge.

You can only file bankruptcy once

While the Bankruptcy Code attempts to prevent multiple and abusive filings, bankruptcy laws attempt to always make bankruptcy available to those who need it.  There are time restrictions that may prevent a second discharge; for instance, an individual debtor who received a prior Chapter 7 bankruptcy discharge is not eligible to receive another Chapter 7 discharge for eight (8) years from the date of filing of the prior Chapter 7.  However, that debtor is eligible for a Chapter 13 discharge after four (4) years from the date of filing of the prior Chapter 7 bankruptcy.

If you have a job you can't file bankruptcy

The truth is that Chapter 13 bankruptcy is called a "wage earner's" bankruptcy and the debtor must have a stream of steady income to qualify to file a Chapter 13.  Many families with multiple incomes are also eligible to file bankruptcy.

Don't be misled by bankruptcy myths.  Get the facts from an experienced bankruptcy attorney and ensure the law is working for you.