Common Myths About Bankruptcy

When clients come in for an initial bankruptcy consultation they have a lot of questions and concerns about what bankruptcy involves. They usually have a lot of fears and concerns about filing for bankruptcy because they have heard from family and friends about all the negative things that will happen if they file for bankruptcy. Many of these clients will avoid filing for bankruptcy simply because they have been misinformed about what will happen if they file bankruptcy. It is important that before you make a decision about whether you should file for bankruptcy you get truthful answers about what bankruptcy involves and how it will affect you. Many of what is heard through the grapevine about bankruptcy is misleading and untrue. Some of the common myths about bankruptcy include.

• If I file for bankruptcy I won't be able to rent an apartment

  - There are thousands of people who file for bankruptcy each year and from my experience none of them are on the streets. It is true that bankruptcy will affect your credit score and it may affect where you can rent, but I have never heard of anyone who could not find a place to live because they filed for bankruptcy. Bankruptcy filing can affect where possibly you are approved for renting, but it is highly unlikely that you won't be able to rent anywhere. This is especially true now. I am sure that many places that are renting are aware that many people are going through financial difficulties. They may consider your bankruptcy filing, but I don't think (give these times) they would use that as the end all to determine whether they should rent to you.

• If I file for bankruptcy my credit will be ruined for 10 years

  - Although a Chapter 7 bankruptcy filing can stay on your credit report for 10 years, this does not mean your credit will be ruined for 10 years. Generally people who use strategies to improve their credit after they have filed for bankruptcy have been able to get their credit score to a good level after 2-3 years. The key is to use methods to improve your credit score after your bankruptcy filing such as obtaining a secured credit card and ensuring that your monthly payments on any credit cards are paid on time. Second more than likely if you are considering filing for bankruptcy, you have probably already defaulted on your payments and your credit is already bad. Filing for bankruptcy will not make it much worse, if your credit is already bad. In some instances filing for bankruptcy actually improves your credit score because you are eliminating debt balances that previously affected your credit score negatively.

• If I file for bankruptcy I won't be able to keep my house

  - For most people who are filing for bankruptcy, there is no equity in their home. Generally as long as you are current on your mortgage payments and keep current, there should not be any problem with you keeping your house. Even if there is equity in your home, the bankruptcy exemptions for your state may be able to protect the equity in your home, so that you can keep your home even if you file for bankruptcy.

• If I file for bankruptcy I will be fired

  - There is a specific provision in the bankruptcy law that prevents employers from firing you simply because you have filed for bankruptcy. If anything you are more likely to have problems at work because you are late on your payments and have not done something about it. It is highly likely that creditors eventually will start contacting your work if you default on your payments. There is also the possibility that they will obtain a judgment against you and then try to garnish your wages through your employers. You are more likely to have problems with your employer because of creditor calls or an existing wage garnishment, than from filing for bankruptcy.

The important think is to seek the advice of a legal professional instead of basing your decision on what you have been told about bankruptcy. Most fears and information that are passed down from friends and relatives about bankruptcy turn out to be erroneous. The majority of what my clients have told me that they have heard from friends and family members was incorrect. Seek accurate information about filing for bankruptcy and then decide if bankruptcy can help you .