Common Bankruptcy Myths And The Truths Behind Them

When you are considering filing for a bankruptcy, you probably have some preconceived notions about the process in your head. Unfortunately, there are a lot of commonly held beliefs about the process that are just not true. To help you sort out the facts about bankruptcy, Minneapolis bankruptcy lawyer has compiled this list of common bankruptcy myths and the truths behind them.

Myth #1: Your credit is permanently destroyed
Filing bankruptcy may make it hard for you to rebuild your credit, but it is certainly not impossible to do. If you are worried about how filing may affect your score, please speak with your Minneapolis bankruptcy attorney to discuss ways you can improve your rating.

Myth #2: You can improve your credit by filing bankruptcy
This is one of the most untrue bankruptcy myths around. No matter how bad your credit is, adding a black mark like bankruptcy will only make it worse.

Myth #3: You can erase all of your debt without paying a thing
There is no miracle way to erase debt without losing your property. When you file for bankruptcy, you agree to either pay back your debts on a scheduled repayment plan –Chapter 13, or you agree to give up most of your property to be auctioned off to help pay your creditors –Chapter 7.

Myth #4: You lose your house, car and all the rest of your property
When you file for Chapter 7, your property will be sorted into categories and the value of these categories will be estimated. You may then choose to keep two categories of property. You may even keep your house if the total land owned is under an acre and the value is under $200,000.

Myth #5: The only people who need bankruptcy are deadbeats
This is a commonly believed misconception. In reality, most people who file for bankruptcy are responsible citizens who have incurred upon massive and unexpected expenses –usually medical bills.

Myth #6: You can discharge all debts
You can only discharge some types of debt. Those that are generally non-dischargeable include: debts owed due to fraud; debts owed due to the loss of a DUI injury lawsuit; delinquent taxes; child support; alimony; post-divorce debts to a former spouse; student loans; debts unlisted to the court and more. If you have any questions about whether or not a specific debt can be discharged, please speak with your Minneapolis bankruptcy lawyer.

Myth #7: You can pick and chose what creditors to repay
You will be required to include all creditors in your bankruptcy petition. By failing to list all creditors in the filing, you may have your bankruptcy dismissed. The court will always pay creditors with secured debts first and will not take into account the wishes of the debtor.

Myth #8: Both spouses have to file for a bankruptcy
While it is often a good idea for both spouses to file together if they have any shared accounts and particularly any shared debts, it is not required. If one partner chooses not to file, the bankruptcy will impact their credit rating if they share any accounts. Additionally, if there are any shared debts, the creditor will look to the person who has not filed to pay off the balance in full. If you aren’t sure if you should file jointly or individually, please speak with your Minneapolis bankruptcy attorney.

Myth #9: You can only file once
You can file more than once, but you can’t file all the time either. To help prevent abuse of the bankruptcy system, while still offering support to those that need it, the government has issued waiting periods between bankruptcy filings. If you have filed for Chapter 7 and want to file for it again, eight years must pass. If you filed for Chapter 7 and wish to file for Chapter 13, four years must pass. Lastly, if you filed Chapter 13 and want to file for it again, two years must pass.

Myth #10: You can rack up debt just before filing for bankruptcy
This is a terrible idea and is likely to get your bankruptcy dismissed by the judge. In many cases, it will be seen as an attempt to defraud your creditors via bankruptcy. The court trustee will review all of your debts just before your case and this is one of the red flags he or she will be looking for.