Debunking Popular Bankruptcy Myths

From the way it is portrayed in the media, it might seem like everyone has an opinion about bankruptcy – or that the process is inherently negative. All this to say there are a lot of myths and misconceptions regarding bankruptcy. Our team at Busch, Reed, Jones & Leeper, P.C. is here to clarify a few of those myths today.

Myth: People Who File for Bankruptcy Are Financially Irresponsible

Most people don’t get into debt because they go crazy on credit cards, but everything from an injury or illness to a new baby can make your financial situation harder to handle. According to the American Bankruptcy Institute, the leading causes of bankruptcy are divorce, severe illness, and job loss.

If you are overwhelmed with medical bills, struggling to find a new job, or going from one household to two, there is no shame in starting fresh financially.

Remember, most bankruptcies are the result of an unhealthy economy – not being financially irresponsible.

Myth: Bankruptcy Strips the Clothes Off Your Back

We’ve all seen that scene on T.V. where “the bank” comes in and leaves a previously wealthy family destitute, but this is not an accurate portrayal of bankruptcy. If you file for Chapter 7 Bankruptcy, you may have to sell some of your assets, but you will get to stay in your home and keep your furniture, clothing, and other basics.

If you have assets you want to protect, however, like a valuable family heirloom or a designer wardrobe, you can choose to file a Chapter 13 Bankruptcy or a “wage earner’s plan” instead. This will allow you to make your bills more manageable and pay as much of them off as possible in 3 to 5 years without selling any of your assets.

In either situation, your bankruptcy trustee will never leave you out in the street in your underwear, so don’t let that image stop you from regaining control of your financial situation.

Myth: Your Credit Will Never Recover

Bankruptcy stays on your credit report for up to seven (7) years. Although this can make it more difficult to get a car loan or a credit card, bankruptcy does not ruin your credit – and it will not haunt you forever. In fact, some creditors specialize in helping people rebuild their credit after bankruptcy.

To learn more, read our blog: “Yes, You Can Still Buy a Car After Bankruptcy.”

Myth: You Will Be Totally Debt-Free After Bankruptcy

Unfortunately, bankruptcy cannot dissolve all debts. Unless you have “undue hardship,” you cannot discharge student loans in bankruptcy, and obligations like tax debt, alimony, and child support will not go away just because you filed for bankruptcy.

Additionally, filing for Chapter 7 bankruptcy will not save your home from foreclosure, and dissolving secured debts (those tied to a car or home) is more difficult.

Myth: You Can Go on a Shopping Spree Before Filing for Bankruptcy

When you file for bankruptcy, courts examine your financial situation closely, and any unusual behavior before you file could get you in trouble. For example, if you go on a shopping spree and spend more than $750 on luxury goods or services within 90 days of your filing date or take out cash advances of $1,000 or more within 70 days of your filing date, you could be charged with presumptive fraud.

Similarly, you cannot give any of your creditors preferential treatment before filing for bankruptcy. If you pay a friend or family member back for a loan, then file for bankruptcy, the court may question you or file charges against you.

In short, you can get a massage to relieve some of your stress, but you cannot go on a shopping spree before filing for bankruptcy. When it comes to your creditors, let the court figure it out.

Myth: Filing for Bankruptcy Is Difficult

The process of filing for bankruptcy is not difficult, but the process itself can be stressful and emotionally draining. Additionally, you will have to undergo credit counseling and give the court every detail about your financial circumstances.

In a culture that is quiet about money, this can be hard to do. Nevertheless, having the right attorney on your side can make the process as simple as filling out some forms and attending a few meetings.

Our lawyers at Busch, Reed, Jones & Leeper, P.C. have more than 150 years of combined experience helping clients like you make it through bankruptcy. We offer cost-effective legal services and the protection you need to get through this chapter of your life.

As professional, reputable attorneys, we will never judge you. We know better than anyone that there is no shame in filing for bankruptcy. Our only goal is to help you move forward and achieve a better future.

If you’re ready to get started, please don’t hesitate to call us at (770) 629-0154 or contact us online for a consultation. We look forward to walking you through your rights and legal options and helping you make the best choice in your unique situation.