Ever hear the phrase, “possession is 9/10ths of the law”? Me too. A zillion times. But I have no idea where it came from. Just like the “one phone call” rule you see in all of the cop shows. These are just two of the myths about the law that are perpetuated, often by Hollywood. The Internet is another great source for bankruptcy myths. Below are some examples of bankruptcy myths:
1. Everyone Will Know I Filed for Bankruptcy
Unless you’re a prominent person or a major corporation and the media picks up the filing, the chances are very good that the only people who will know about a filing are your creditors. While it’s true that bankruptcy is a public legal proceeding, the numbers of people filing are so massive, very few publications have the space, the manpower or the inclination to run all of them.
2. Chapter 7 Wipes Out All Debts
Even if you file Chapter 7 bankruptcy, you could still be on the hook for certain debts, such as child support, back taxes, or a judgment from a personal injury action against you.
3. I’ll Lose Everything I Have
In most bankruptcy cases, you’ll keep everything you own. Colorado has exemption laws that protect you from having certain kinds of property from being taken away. In a small amount of cases, if you own something that is particularly valuable, the bankruptcy trustee may require you to turn over the property so that he can sell it and pay the proceeds to your creditors.
4. I’ll Never Get Credit Again
Of course, every case is different, but we have seen people in Chapter 13 borrow money during the case and people who’ve filed Chapter 7 get inundated with credit card offers after they get their discharge. This is not credit at the best rates, but credit is available. The myth probably got its start in the fact that the Fair Credit Reporting Act allows the reporting of a bankruptcy filing for 10 years.
5. Only Deadbeats File for Bankruptcy
This is the most unfortunate myth. Everyday, we see good, hardworking people who are faced with the agonizing decision to file bankruptcy. They have gotten to the end of their rope and are faced with making one of the most difficult decisions they may have to face. Most people who are thinking about bankruptcy are overwhelmed by debts that have come about due to unemployment, unexpected medical costs, or divorce.
6. Filing for Bankruptcy Will Improve My Credit Rating
Filing for bankruptcy is the worst ‘negative’ you can have on your credit report. Unlike other negatives, which stay on your report for seven years, bankruptcy can be there for 10 years. Filing bankruptcy is a serious decision which will impact your life in significant ways.
7. Married Couples Must File Together
You do not have to file for bankruptcy with your spouse. But before you make that decision, you should probably talk with a Colorado bankruptcy attorney to see if that is your best choice. If you and your spouse do not file together, the non-filing spouse could be on the hook for any joint debts. If that happens, the collection calls and lawsuits won’t stop. However, if only one of you is responsible for your debts, it may make sense for just one of you to file.
8. Chapter 13 Bankruptcy Makes You Pay All Your Debts
How much you have to pay your creditors under Chapter 13 bankruptcy can only be determined after you complete the means test. Chapter 13 payment plans can vary widely, from requiring you to pay nothing to your creditors to paying 100% back.
9. You Must Have a Minimum Amount of Debt to File Bankruptcy
There is no minimum amount of debt required to file bankruptcy. If you do not have the ability to pay, bankruptcy can be a smart choice, no matter how much you owe.
10. Creditors Can Still Harass You if You File Bankruptcy
As soon as you file bankruptcy, collectors must stop all collection activity, including phone calls, letters, and lawsuits. If a creditor continues to harass you, the bankruptcy court can fine it for violating the bankruptcy laws.
To learn more about whether or not Chapter 7 bankruptcy or Chapter 13 bankruptcy is your best option, schedule your free, confidential bankruptcy consultation with a Colorado bankruptcy attorney today. Our online scheduling system allows you to schedule a bankruptcy consultation at a time that is convenient for you, or you can call 303.331.3403 to make an appointment.