A few months ago we posted Five Bankruptcy Myths Dispelled. We received such positive feedback, we decided to do a follow up to the article!
We have been practicing bankruptcy law for over 35-years. In all of this time myths about bankruptcy have remained prevalent. In nearly every free consultation, we continue to dispel at least one bankruptcy myth.
In an effort to help people better understand what bankruptcy is (and isn’t), we have compiled a list of five more bankruptcy myths we often hear. Read about the five bankruptcy myths from our original article here.
Bankruptcy Myth 1: Only people who are financially irresponsible file for bankruptcy.
This is absolutely not true. One of the leading causes of bankruptcy continues to be massive medical debt. Often people who file for bankruptcy experienced a catastrophic injury or illness, or a job loss, or are coming out of an expensive divorce. None of these events speaks to financial irresponsibility.
It is true that some people who file for bankruptcy made financially irresponsible choices. The Bankruptcy Code requires that all filers complete a course in personal financial management. This serves to educate people and empower them to make wise financial decisions moving forward.
Bankruptcy Myth 2: All of your debts will be erased.
Bankruptcy is a powerful tool that can erase many debts; however, there are some exceptions. Generally, credit card and medical debts are discharged (erased) through bankruptcy. Debts that are nondischargeable in bankruptcy include back child and spousal support, student loans, recent tax debts, and certain fines imposed by the government.
This list is not exhaustive. Prior to filing for bankruptcy, make sure you understand which debts you will still be obligated to pay after bankruptcy.
Bankruptcy Myth 3: Filing for bankruptcy ruins your credit permanently.
While bankruptcy does lower your credit score, many people are surprised to find their credit score begins to recover fairly quickly. After bankruptcy people are able to get car loans, mortgages, and lines of credit.
It is important to check your credit report after bankruptcy and ensure your accounts are marked as discharged in bankruptcy, and that other information is reporting accurately. To learn more, read our article Order a Free Credit Report. Also, a bankruptcy filing does not say on your credit report permanently. A Chapter 7 bankruptcy will remain on your credit report for 10-years, and a Chapter 13 bankruptcy for 7-years.
Bankruptcy Myth 4: You can max out credit cards right before filing for bankruptcy and not have to pay that money back.
Not only is this not true, incurring debt with the intent to erase it in bankruptcy may constitute bankruptcy fraud! Debt incurred as a result of fraud is nondischargeable.
Under the Bankruptcy Code exceptions to discharge, consumer debts aggregating more than $675 to one creditor, for luxury goods or services (not necessary living expenses) made within 90-days of filing for bankruptcy are presumed nondischargeable. 11 U.S.C. §523(a)(2)(c).
Bankruptcy Myth 5: Spouses must file bankruptcy together.
Spouses have the right to file jointly for bankruptcy; however, they do not have to file together. In cases where only one spouse files for bankruptcy, careful attention must be paid to the nature of the assets. It is critical to understand what property will be treated as part of the debtor’s bankruptcy estate.
We Offer Free Consultations
Meet with us for a free, no-obligation consultation. Call us at right now at (912) 351-9000, or email info@BrazielLaw.com. We are here to give you real information about your rights and how bankruptcy can help you.
We are proud to serve people in Savannah, Richmond Hill, Hinesville, Pooler, Port Wentworth, Tybee Island, Clyo, Ellabel, Midway, Springfield, Pembroke, Brooklet, Garden City, and Ludowici Georgia. We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.