Deshur Law Firm LLC, Attorneys & Lawyers  Bankruptcy, Chicago, IL
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    Bankruptcy Myths

    The moribund US economy long ago removed the stigma connected with filing for Bankruptcy protection.   Yet, the general public still has a very mistaken impression about the impact of Bankruptcy on one’s financial affairs.  Below is a list of the most common myths associated with filing for Bankruptcy:

    Myth 1: Filing for Bankruptcy hurts your credit for 10 years.
    Not True.  Although the Bankruptcy will stay on your credit for 7-10 years, you can start rebuilding your credit right away.  Making current, full payments on debt is one way to start building your credit while you are still in the Bankruptcy.  Once you are out of Bankruptcy, make sure that you watch your income to debt ratio and try to not finance more than 40% of your credit limit.

    Myth 2: Everyone will know you filed for Bankruptcy.
    Not True.  Bankruptcy is a public record, but unless you are a prominent official in society, people aren’t going to go looking.  The only people who are going to know are those who you tell and those who have access to the Bankruptcy court record system.

    Myth 3: There is no help with the new Bankruptcy law.
    Not True.  The Bankruptcy reform act changed only the method in which clients qualify for the different types of Bankruptcy.  It doesn’t prevent people from filing and, in most situations, people are still able to get the same relief now as before the law changed.

    Myth 4: You are a bad person for filing Bankruptcy.
    Not True.  There is a reason that over one million people file for Bankruptcy each year and it is not because they are bad people.  Bankruptcy is a solution to help good people go through a bad time.  It provides hard working people with the fresh start that they deserve, but are not able to obtain.  

    Some religious texts which illustrate the forgiveness principle of debt are the Old and New Testaments of the Bible. 

    In the New Testament of the Bible, Bankruptcy contemplates the "forgiveness" of debt. Two parables are used to illustare the forgiveness of a financial debt (see Matthew 18:21-35 and Luke 7:36-50).  "And when they had nothing with which to repay, he freely forgave them both" (Luke 7:42).  Additionally, a guiding principle of U.S. bankruptcy law requires persons who file for bankruptcy to have "clean hands."  Accordingly, a debtor may not be freed from debts involving fraud, drunk driving, and deliberate wrongdoing.  Through these restrictions, bankruptcy laws seek to balance justice and equity (Proverbs 1:3).

    In the Old Testament of the Bible, readings encompass compassionate treatment of debtors, superior to the material concerns of debt repayment. Deuteronomy 15:7-10 provides : “If there is a poor man among your brothers. . . do not be hardhearted or tightfisted toward your poor brother. Rather be open-handed and freely lend him whatever he needs. . . ‘The seventh year, the year for canceling debts, is near,’. . . .Give generously to him and do so without a grudging heart; then because of this the LORD your God will bless you in all your work and in everything you put your hands to.” One of the Old Testament principles which can be applied to modern day bankruptcy laws is that debt can be canceled to achieve a higher purpose.

    Filing for Bankruptcy is not an “immoral” act, but rather an opportunity to “get a fresh start” rooted in thousands of years of history.

    Myth 5: You can pick and choose what to put into Bankruptcy.
    Not True.  You do have to list all of the debts that you owe and the property that you own.  You cannot discriminate between creditors, even if you want to keep paying them.  It is good to want to continue paying creditors, but it is still mandatory to include the debt.  If you feel like paying it after the Bankruptcy then go ahead, but you will not be obligated to. 

    Myth 6: It's hard to file for Bankruptcy.
    Not True.  There is a lot of paperwork involved, but having a skilled attorney makes the process much smoother.  Filing Bankruptcy is even electronic these days, which minimizes paperwork on your part. 

    Myth 7: You will never be able to own property again.
    Not True.  You will get credit card offers and be extended credit right after the discharge of your Bankruptcy.  There are also creditors that will lend to you while you are in Bankruptcy.  You will be able to purchase whatever you can afford.

    Myth 8: You will lose everything you own.
    Not True.  Bankruptcy allows you to keep your property.  Outside of Bankruptcy you could lose your property to creditors, but once you have filed for Bankruptcy, you and your property are protected.  Laws that allow you to keep property vary from state to state and you should consult an attorney in your area to property advise you of the laws in your jurisdiction.  Bankruptcy doesn’t always wipe out liens, which means if you want to continue to keep the property you will need to continue to pay the lien.

    Myth 9: Both you and your spouse have to file Bankruptcy together.
    Not True.  You can file together or separately, that is your choice.  In many cases it makes sense for husband and wife to file together, but in some instances the spouse might not want to file.  This is absolutely fine and definitely allowed by the court.

    Myth 10: You can't get rid of back taxes in Bankruptcy.
    It depends.  You can get rid of income taxes that are more than three years old by filing Bankruptcy.  There are several qualifications that have to be met in order for the taxes to be wiped out, but having a portion wiped out is better than none at all.  In addition, sales taxes must be repaid and cannot be wiped out by filing Bankruptcy. 

    Myth 11: You can only file Bankruptcy once.  
    Not True.  You can file for Bankruptcy as many times as you like.  Although, you are limited by how often you can receive a discharge.  You can receive a discharge from Chapter 7 once every 8 years.  You can receive a discharge from Chapter 13 every 2 years.  If you get discharged in a Chapter 7 you have to wait 6 years before getting a discharge from Chapter 13.  If you get a Chapter 13 discharge then you need to wait 4 years to get discharged from a Chapter 7.  However, there is no waiting period if your case is dismissed.  You can file back to back should you choose.

    Myth 12: You can never get credit again.
    Not True.  You will start establishing credit from day one.  Bankruptcy wipes out debt, which in turn helps your credit score.  By making timely payments on the property that you choose to keep also shows a record of good credit.  You will be able to get credit as soon as your Bankruptcy is discharged and sometimes sooner.

    Myth 13: Only losers file for Bankruptcy.
    Not True.  Bankruptcy is a means for good people who are going through bad times to get relief.  Many times people have to file because they have lost their job, gone through divorce, or experienced medical illness.  Bad times don’t make a person bad.  Bankruptcy can provide the relief that good hardworking people need to get them out of the bad time.

    Myth 14: Creditors can still harass you if you file for Bankruptcy.
    Not True.  When the Bankruptcy is filed, automatic protection is put onto you and all of your property instantly.  Creditors are not allowed to contact you for any reason, which includes calling or even billing you.  If they persist in harassing you, you do have remedies available through the Federal Bankruptcy laws.

    Myth 15: Filing Bankruptcy causes more family trouble and divorce.
    Not True.  Bankruptcy eliminates debt eliminating financial stress.  Filing Bankruptcy is the solution to the problem, not an additional problem.  Although making the decision to file Bankruptcy might be difficult one, the relief provided will lift a huge weight off of you.  The absence of financial stress will give your relationship a fighting chance.