Bankruptcy Myths

Bethlehem Bankruptcy is dedicated to helping clients thoroughly understand the bankruptcy process, their legal rights and their options in restructuring or discharging their debt.

There are a number of myths about bankruptcy, and we have identified several of these to ease your mind.

You Will Never Get Credit Again if You File For Bankruptcy

This is simply not true.  Although a bankruptcy can stay on your credit report for up 10 years from the date of filing, you can start rebuilding your credit as soon as your bankruptcy is closed and discharged.  Many of our clients purchase new homes, vehicles, and even qualify for credit cards a few months after the bankruptcy is concluded.  In fact, many creditors will start offering credit right after the discharge because they know you cannot file for bankruptcy again for a certain amount of years.

Lenders Will Ignore You if You File for Bankruptcy

This is false.  After Congress passed the new bankruptcy laws in 2005, much of the stigma associated with bankruptcy vanished.  Many lenders understand the problems with our economy and the affect of this crisis on consumers.  So many will offer credit to those affected by bankruptcy.  While interest rates may be higher, you can still get credit, despite a bankruptcy filing.

People Who File for Bankruptcy Are Stealing and May Go to Jail

This is totally False.  Each year, over one million people choose to file for bankruptcy, whether through Chapter 7 or Chapter 13.  These are good people, just like you, who are in difficult financial situations, and have fallen on hard times. Majority of bankruptcy filers are in desperate need of relief and turn to the advantages of bankruptcy as a last resort to assist them through this difficult time.

Whether you lost your job and can’t pay your credit cards, or became ill or injured and incurred significant medical bills, you are not a bad person for choosing bankruptcy relief. Congress created the federal bankruptcy laws to assist hard working people eliminate their debts and move on with their lives.  If you are facing this type of hardship, Bethlehem Bankruptcy can help.

You Cannot File Bankruptcy by Yourself if You Are Married

This is false. The bankruptcy laws permit anyone to file for bankruptcy, whether individually or jointly.  If you are married, you and your spouse must decide if a joint filing is necessary.

For example, if you and your spouse have joint debts together, such as a mortgage, credit cards, and/or loans, then filing together makes sense.  The bankruptcy will help eliminate or restructure these joint debts.  However, in new marriages, where one spouse has good credit or no joint debts, it may be smarter for the other spouse to file individually to eliminate his or her own debts.

You Can Only File for Bankruptcy Once in Your Lifetime

This is absolutely false.  While the bankruptcy laws were tightened in 2005, you are still permitted to file for bankruptcy more than once in your lifetime, depending on when you filed and the type of bankruptcy.

In Chapter 7, you can receive a discharge once every 8 years, and in Chapter 13, you can receive a discharge every 2 years. If you get discharged through Chapter 7, you have to wait 6 years before obtaining a discharge through Chapter 13. If you obtain a Chapter 13 discharge, you must wait 4 years before getting a discharge through Chapter 7.

Bankruptcy Will Destroy Your Credit Score

This is false. While your credit rating will be affected when you file, it will not be destroyed your credit rating forever.  Depending on your situation and level of debts, your credit rating may actually increase by filing for bankruptcy.  Bankruptcy helps eliminate the negative consequences of your unpaid debts, whether you file under Chapter 7 or Chapter 13.  All negative activity will terminate, including interest, late fees, collection fees, and attorney fees.  Ten years after filing, the bankruptcy will also be removed from your credit report, revealing a clean slate.

Some Creditors are Protected from the Bankruptcy and Can Still Sue You

This is absolutely false. In fact, one of the primary reasons to file bankruptcy is to eliminate ALL collection activities.  When you file the bankruptcy petition, whether through Chapter 7 or Chapter 13, you and your property receive automatic protection from the court against your creditors (known as the “automatic stay”), which also includes the creditor’s attorneys, collection agencies, representatives, and/or agents.

Federal law specifically prohibits your creditors from contacting you for any reason, including through written correspondence, monthly bills, or phone calls.  Creditors must cease all collection efforts against you, meaning they cannot file a new suit, continue a prior lawsuit, or collect on a prior legal judgment.

Most People Do Not Qualify for Bankruptcy Because of the Means Test

This is not true. When the new bankruptcy laws passed in 2005, many debtors became worried.  Creditors tried to convince the country that bankruptcy would only apply to a small percentage of poor and destitute people.  This was a enormous lie of the new laws.  The 2005 legislation changed the method in which debtors qualify for bankruptcy under the Means Test, but it did not prevent people from filing.

In fact, bankruptcy filings have actually increased since the new laws were enacted, especially in light of the foreclosure crisis.  To learn the truth about the current bankruptcy laws under Chapter 7 and Chapter 13, give Bethlehem Bankruptcy.

Contact Bethlehem Bankruptcy Lawyer today for a free consultation at 800-123-1234.