Bankruptcy Myths

There are a lot of myths when it comes to filing for bankruptcy. Everyone seems to have advice when you facing financial constraints. While the advice is well meaning, it is also often times wrong. Below are some of the bankruptcy myths you may have heard. If you have further questions about other myths you may have heard, contact Lincoln Bankruptcy Lawyers at Stephanie Flynn Law or call (402) 325-8469.

Myth 1: Only deadbeats file for bankruptcy.

Many people who file for bankruptcy have fallen on hard times. It could be due to loss of a job, unmanageable medical bills, or other unexpected financial strains. Often people have been struggling for months to try and get back on their feet, but are unable to make ends meet.

Myth 2: My credit will be destroyed if I file bankruptcy.

Bankruptcy may stay on your credit report up for to 10 years. Some creditors may look at this negatively; however, you need to take into consideration the current state of your credit. If you’ve already missed payments, your credit has already been affected. Filing bankruptcy is not likely to significantly reduce your credit score further. Additionally, you can rebuild your credit after filing for bankruptcy.

Myth 3: I’ll lose all my possessions if I file for bankruptcy.

Most people who file for bankruptcy don’t have to give up anything. All states have exemptions that help protect assets such as you home, car, retirement accounts, bank accounts, and household goods.

Myth 4: I can file for bankruptcy as many times as I want/I can only file once.

You can file for bankruptcy more than once, but there are waiting periods after filing bankruptcy before you can file again. A debtor who has filed a Chapter 7 will have to wait eight (8) years before filing another Chapter 7 and four (4) years before filing a Chapter 13. A debtor who has filed a Chapter 13 will have to wait two (2) years to file another Chapter 13 and six (6) years to file a Chapter 7.

Myth 5: I cannot discharge credit card debts/I can max out all of my credit cards then file for bankruptcy and never pay for the things I bought.

Credit Card debts can still be discharged, however, it would be considered fraudulent to max out credit cards and then try to discharge all of the debt in a bankruptcy filing. If fraud is found in regards to otherwise dischargeable debt, that debt becomes non-dischargeable in the bankruptcy.

Myth 6: I can transfer nonexempt property to family and friends to prevent losing it in a bankruptcy.

Certain transfers have to be disclosed to the trustee. These types of transfers may be considered fraudulent and could cause the dismissal of your bankruptcy filing.

Myth 7: I don’t have to list all debts/all debts can be discharged in a bankruptcy filing.

All debts must be listed in your filing. You cannot pick and choose the debts to include. If all debts are not listed, those debts may not be discharged in your bankruptcy. However, even if listed, not all debts will be dischargeable in a bankruptcy filing such as child and spousal support. Further, student loans and taxes are generally non-dischargeable as well.

Myth 8: A spouse can file a joint bankruptcy without obtaining the other’s permission.

Both spouses must give permission to file a joint bankruptcy. However, someone who is married can file individually. If one spouse files bankruptcy on joint debt, it will not discharge the obligation of the other spouse. This means that a creditor can go after the non-filing spouse for payment of the debt.

Myth 9: I can’t afford to file for bankruptcy.

The fees associated with filing for bankruptcy are minor compared to the money you’ll save in discharging or reorganizing your debt.

Myth 10: Medical bills cannot be discharged/medical bankruptcy is an option.

Medical bills can be discharged, however, there is no such thing as medical bankruptcy. Even if medical bills are the reason you chose to file bankruptcy, you must include all of your debt in the filing, affecting all of your creditors, not just your medical creditors.

Contact bankruptcy lawyers at Stephanie Flynn Law or call (402) 325-8469 to further discuss filing bankruptcy and how filing bankruptcy. 

Stephanie Flynn Law is a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.