Dalton Georgia Bankruptcy Attorney addresses Common Myths about Bankruptcy

Today’s discussion addresses some of the most common myths about bankruptcy.

1. Everyone will know I’ve filed for bankruptcy.

Unless you’re a prominent person or a major corporation and the filing is picked up by the media, the chances are very good that the only people who will know about a filing are your creditors. While it’s true that bankruptcy is a public legal proceeding, the number of people filing is so massive that very few publications have the space, the manpower or the inclination to run all of them.

Some local newspapers publish bankruptcy filings (the newspaper in Rome, GA, for example), but the majority of local newspapers have better things to print. The newspaper in Cartersville, GA – The Daily Tribune News – for example, does NOT print bankruptcy filings.

2. All debts are wiped out in Chapter 7 bankruptcy.

Certain types of debts cannot be discharged and erased. They include child support, alimony, government-issued or government-guaranteed student loans, and debts incurred as the result of fraud.

3. I’ll lose everything I have.

This is the misconception that keeps people who really should file for bankruptcy from doing it. They think the government will sell everything they have and they’ll have to start over in a cardboard box.

While the bankruptcy laws vary from state to state, every state has exemptions that protect certain kinds of assets, such as your house, your car (up to a certain value), money in qualified retirement plans, household goods and clothing. Georgia’s exemptions are discussed in a previous blog. If you’re concerned about keeping your property, it’s a good idea to make an appointment with me, or Brad Stephens, to discuss whether any of your property is at risk.

Most people will pass through a bankruptcy case and keep everything they have.

4. I’ll never get credit again.

Quite the contrary. It won’t be long before you’re getting credit card offers again. They’ll just be from subprime lenders that will charge very high interest rates. “There are innumerable companies that will provide credit to you,” says California bankruptcy attorney and trustee Howard Ehrenberg. “I don’t advise any of my clients to run out and run up the bills again, but if someone does need an automobile, they can go and will be able to get credit. You don’t have to go underground or something to get money.”

5. Only deadbeats file for bankruptcy.

Most people file for bankruptcy after a life-changing experience, such as a divorce, the loss of a job or a serious illness. They’ve struggled to pay their bills for months and just keep falling further behind.

With credit markets tightening, chances are you’re not in a position to buy a house or car. But if you are, you might want to do that before you file. After bankruptcy, those loans will be tough to get and the higher interest rate on such a large purchase would have a significant effect on your payments. Also, if you have a credit card with a zero balance on the day you file for bankruptcy, you don’t have to list it as a creditor since you don’t owe any money on it. That means you might be able to keep that card even after the bankruptcy.

6. If you’re married, both spouses have to file for bankruptcy.

Not necessarily. It’s not uncommon for one spouse to have a significant amount of debt in their name only. However, if spouses have debts they want to discharge that they’re both liable for, they should file together. Otherwise, the creditor will simply demand payment for the entire amount from the spouse who didn’t file.

7. I don’t want to include certain creditors in my filing because it’s important to me to pay them back someday and if the debt is discharged, I can’t ever repay them.

Bless you for even thinking about such a thing. You’re no longer obligated to repay them, but you always have that opportunity. If your conscience won’t let you sleep nights because you didn’t pay your debts, there’s nothing in the bankruptcy code that prevents you from doing that once you’re back on your feet. But bankruptcy is an all-or-nothing deal, so you have to include all your creditors in the petition.

8. You can’t get rid of back taxes through bankruptcy.

This is one of the most common misconceptions about bannkruptcy. Taxes CAN be discharged through bankruptcy, but you’ll need to dicuss the criteria for dischargeability with your attorney. Generally, income taxes that came due more than 3 years ago CAN BE EILIMINATED.

9. You can file for bankruptcy only once.

You can file for bankruptcy more than once, but the bankruptcy law that went into effect in October 2005 lengthened the required wait between filings. You can file for Chapter 7 bankruptcy only once every eight years. You have to wait two years to repeat a Chapter 13 filing and four years between a Chapter 7 and a Chapter 13 case.

10. I can max out all my credit cards, file for bankruptcy and never pay for the things I bought.

That’s a form of fraud and credit card lenders, as well as bankruptcy judges, can get really cranky about it.

For a free consultation about bankruptcy or debt relief, call today for an appointment. We have offices located in Cartersville, Dallas, Calhoun and Dalton. (770) 382-8900

Brian R. Cahn
Cartersville | Dallas | Dalton | Calhoun | Atlanta


Posted on September 29, 2011, in Bankruptcy and tagged , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. Leave a comment.

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