Common Bankruptcy Myths

November 24, 2010

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.  In the remaining 96% 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.

 

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 is always available to those who need it.  There are time restrictions that may prevent a second discharge, for instance, an individual debtor who received a chapter 7 bankruptcy discharge to file another Chapter 7 after eight years.  However, that debtor is eligible for a Chapter 13 after four years.

 

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 an income stream to qualify.  Many families with multiple incomes are 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.

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