My Account Login Logout Map to Office Contact Us Public Home Page Call: 1-214-999-0595

Bankruptcy Myths

How do you feel about filing bankruptcy? Are you hesitant, concerned, scared? Many people don't want to file bankruptcy because they are afraid of how it will affect the rest of their life. They believe there is a negative stigma associated with filing bankruptcy. But the truth is, bankruptcy is there is help you. The personal situations that people are facing in these economic times is precisely why the government created bankruptcy law. We are here to help you clear up any misconceptions you have about bankruptcy and help you get comfortable with filing bankruptcy so you can get your life back toward financial health.

There also are many urban myths about bankruptcy. These myths grew and spread like wildfire when Congress made sweeping changes to the bankruptcy laws in 2005. Unfortunately, these myths and misconceptions can effect whether someone decides to file for bankruptcy today. Yes, the law did change and for some, it is not as easy to qualify for bankruptcy now, but it's not impossible. Yes, some types of debt are no longer eligible to be discharged through bankruptcy, but that might not apply to your situation. The fact is, bankruptcy may be the best solution. Most of the myths are exactly that, myths. And regarding the changes in 2005, most of the unappealing provisions have now been removed and bankruptcy again is your friend.

Listed below are several myths and misconceptions about bankruptcy. If any of these myths are preventing you from considering bankruptcy, please call us as soon as possible so that we can discuss the realities of bankruptcy and how it can help you get back on the road to financial stability.

Myth No. 1: Your debt must be very large in order to qualify for bankruptcy.

This is simply not true. Whether you qualify for bankruptcy depends on the amount of your current income and the total amount of your debts. Even if your debt is not considered "large" by some standards, it may be large compared to your income and your ability to pay it back. If your income is low and you don't have the means to repay your debt, you may still file for bankruptcy.

Myth No. 2: Everyone will know that you filed for bankruptcy.

While it is true that court records are, for the most part, a matter of public record, the chances that anyone will be searching to see if you filed for bankruptcy are extremely low. Think about it. I seriously doubt if your neighbors and friends ever try to find out if you or anyone has filed for bankruptcy, or would even know how to find that information. Most often, no one will know that you filed for bankruptcy unless you tell them.

Myth No. 3: The bankruptcy court will take everything I own if I file for bankruptcy.

This is absolutely not true! This myth is probably the greatest deterrent to debtors who are considering filing for bankruptcy. The Texas State and Federal laws provide for liberal exemptions from bankruptcy. This means that you get to keep certain personal and real property and it won't be used to satisfy your debts. At the end of your bankruptcy proceeding, you won't be homeless and penniless. You'll retain your exempt assets and start over with a clean slate.

Myth No. 4: If I file for bankruptcy, my credit will be ruined forever.

Not true! In fact, bankruptcy may be the first step to repairing your already damaged credit. A bankruptcy will appear on your credit history for 10 years, but your credit rating can start to improve very quickly. After your bankruptcy is completed, you can begin to re-establish your credit, by applying for credit cards and taking out loans for cars and other items. While it is true that you may pay a higher interest rate in the short run, your timely payments will repair your credit rating. Of course, you must be responsible with any credit situation, which means not borrowing what you can't repay and always making your payments on time.

Myth No. 5: I can only file for bankruptcy once.

Not true! You can file for Chapter 7 bankruptcy every eight years. For Chapter 13, you can file a second time after only two years. After a Chapter 7 filing, you can file for Chapter 13 after four years. However, just because you can does not mean you should. Hopefully, after only one bankruptcy filing, you will be able to manage your financial affairs or get counseling if tragedies cause financial hardships. Nevertheless, a second bankruptcy remains a viable option if necessary.

Myth No. 6: Even after filing for bankruptcy, Creditors will still be able to send harassing letters and make harassing phone calls.

Not true again! As soon as you file for bankruptcy, there is an automatic stay of ALL collection efforts by creditors. All foreclosures, repossessions, garnishments, collections letters, and calls must immediately stop.

Myth No. 7: The 2005 bankruptcy law changes prevent me from discharging credit card debt and medical services debt.

While it is true that the initial changes severely limited the ability to discharge these debts, those provisions have been eliminated. Credit card and medical services debt are unsecured debt and can be discharged in bankruptcy.

Myth No. 8: Only losers and people who can't manage their finances file for bankruptcy.

Nothing could be further from the truth. This economy has forced many people to resort to credit cards and home equity loans just to make the ends meet. They believed that borrowing in the short term would allow them to "get by" the temporary problem. Unfortunately, things never turned around. Financial problems can also occur due to job loss, illness, divorce, or death in the family. The truth is bad things can happen to good people. Facing mounting debt, bankruptcy could be your best option.

Myth No. 9: Before I file for bankruptcy, I should charge a lot to my credit cards and run up other debt, because I won't have to pay it back.

Do NOT do this. It's fraud and could carry criminal penalties. The bankruptcy trustee will look at all of your debt and when you incurred it to see if you did anything fraudulent. Additionally, any major purchases within 90 days of filing for bankruptcy may not be dischargeable.

Myth No. 10: When I file for bankruptcy, I can hide one or more of my debts because I want to pay them off.

Some people want to hide certain debts, especially those to friends and family members. Don't do this. All debts must be listed in your bankruptcy petition. If you want to completely pay off certain debts, you may be able to reaffirm those debts by separate agreements.

Myth No. 11: I want to file for bankruptcy, so my spouse must also file for bankruptcy.

Not true. If your debts are separate (in your name only) it may not be necessary for your spouse to file. Unfortunately, if your debts are in your name as well as your spouse, the creditor can try to collect from both of you and it may be necessary for your spouse to file as well.

Myth No. 12: I don't need an attorney to file for bankruptcy. I can do it myself.

While it is true that you are free to represent yourself in any legal proceeding, it's not always the wisest thing to do. The Bankruptcy Code is quite complex and it can take years of experience to fully understand its procedural and substantial laws. Without this knowledge and experience, you could severely injure and prejudice yourself, and end up paying debt that, with the proper advice, would have been discharged.

Myth No. 13: I don't need to file for bankruptcy, because a debt consolidation company can negotiate with my creditors to reduce or eliminate my debt.

Debt settlement firms may be able to help you reduce your debt, but they are not attorneys and most times are not familiar with the bankruptcy laws. Without that knowledge, they don't know what options are best for you. Frequently, they keep a large portion of your payments to creditors as fees and they pay themselves fully and completely before they pay off any of your debts. Additionally, according to the agreement reached by the debt settlement firm, if you end up unable to pay off the debt, you still will owe any and all remaining balance to the creditor. And, you don't get back the money you paid to the debt settlement firm!

Myth No. 14: I don't need bankruptcy, because I can negotiate and lower my debts and interest rates with all of my creditors.

Some people are successful in negotiating reductions of some of their debt. However, unless you are an attorney who is familiar with contracts and bankruptcy laws, you may be in over your head. Frequently, creditors are not shy about having debtors sign new agreements that appear better for you if you owe them money, but those new agreements really are not better for the debtor. If you don't truly know your rights, it would be wise to contact professional help.

Myth 15: Hiring an attorney for bankruptcy is very expensive.

It's true that most bankruptcy attorneys charge for their services. However, in most circumstances, the amount paid for attorneys' fees is a drop in the bucket compared to the amount of debt that can be discharged from a properly filed and conducted bankruptcy. Additionally, we offer payment plans that will work for you. We are here to help.