Common Bankruptcy Myths
We have developed the following list of common myths about bankruptcy to help you determine whether it is right for you.
If I file for bankruptcy, I will lose all of my property.
False. There are many ways for individuals to keep their property when filing for bankruptcy. Importantly, there are various exemptions under bankruptcy law that protect people from losing their valuable belongings. Visit our Chapter 7 and Chapter 13 bankruptcy pages for more information.
My credit score will never recover after my bankruptcy action is finalized.
False. The good news is that most people can start the process of rehabilitating their credit as soon as their bankruptcy action is finalized. Since your debts are usually listed as “discharged in bankruptcy” or “settled” or “paid through bankruptcy” on your credit report after your bankruptcy is complete, a creditors view of you is that you cannot file another bankruptcy for at least 8 years such that you are eligible for credit again.
I am not eligible to file for bankruptcy under the new laws.
False. The new laws did not change who is eligible to file for bankruptcy. The new laws only modified who may have the ability to file under a Chapter 7 versus who must file under a Chapter 13.
I will never be able to obtain credit after bankruptcy.
False. Despite this popular belief, most people receive offers from credit card companies soon after their bankruptcy action is complete.
I will not be able to discharge taxes in a bankruptcy action.
False. Personal income taxes may be dischargeable in bankruptcy if they are more than 3 years old and there are no other actions being taken by the taxing entity. Additional provisions also limit when personal income taxes are dischargeable and vary with every case. Other taxes depend upon which agency to which the taxes are owed to and if a judgment has been rendered, or a lien has been placed against real property.
I will never be able to buy a house after my bankruptcy action is complete.
False. Bankruptcy actions do not limit your ability to purchase property. While there may be a waiting period before you can apply for a mortgage loan, it is probably less time than you think.