The Top Five Bankruptcy Myths and the True Truth About Bankruptcy
First you should know that there are many more myths, but these are the most important to understand. After describing and debunking the five big myths, I have a section explaining where the misinformation come from. I hope this helps clear some of the misconceptions out there and helps you to make the best decision possible for your situation.
The Failure Myth (that bankruptcy is your fault)
For more details, you can click on the blue link to read my article titled “Why You Are Not the Problem “.
However, the short explanation is that even if you made some mistakes, the fact that you are in this situation is because of much bigger problems than anything you have done. Nobody wants to file bankruptcy. Though the ‘anti-bankruptcy’ fanatics like make it seem another way, the truth is that less than 1% of people who file bankruptcy are abusing the system. Almost everyone who files bankruptcy is honest, hardworking and good. In fact, a Harvard University Study found that most bankruptcies are importantly linked to health crises. Whatever the reasons, it is clear that most people are not in bankruptcy because they didn’t ‘work hard’. People are in bankruptcy because despite their best efforts, the job market, or job loss, or the medical problem, or the unexpected expense, the divorce or the crazy interest rates, were just more than any person could handle. At Waltzer Law Group we don’t just want to help you with bankruptcy. We want you to keep your dignity. We want to help you understand that even if you have things you can do better, you should not feel badly because of your hardship. It might also make you feel better to click on the blue link to see the list of famous, brilliant and beautiful people who also filed bankruptcy.
The Myth That Bankruptcy Will Ruin Your Credit (and your ability to get a house or car) for 10 Years
This might be the most famous and terrible myth out there. The debt negotiation companies, credit card companies and debt consolidation companies LOVE this myth because it scares a lot of people away from bankruptcy (and scares them into wasting money on debt negotiation). However, it is a total lie. Bankruptcy will not prevent you from getting a really good credit score (even above 700) in less than two years after your discharge. Bankruptcy will not prevent you from getting a good low rate on a car or a house even as soon as two years after your bankruptcy! My clients do it all the time. They are always amazed how quickly their credit score recovers.
So, what is the ‘ten year’ thing you keep reading about?
Here is the Trick. Most People think that having a bankruptcy listed on your credit report automatically means that your credit will be bad or ruined. People assume that if bankruptcy is listed on your credit report, you will not be able to buy a car, buy a house or get another loan. This is totally wrong.
It is true that bankruptcy can stay listed on your credit report for up to ten years. That is where the “Ten-Year” number comes from. However, after a little while, it is almost meaningless. Most people who filed bankruptcy improve their credit within months. Sometimes, bankruptcy can even IMPROVE your credit score.
Special Note Regarding This Myth from Attorney David Waltzer
Thank you for visiting my site. There is so much confusing information out there, particularly about this issue. I want to remind the reader that when it is best for our client, my firm does EVERY KIND OF DEBT SOLUTION(debt negotiation, debt advisement, etc.). Like everyone else in the industry, we make more money with a debt-negotiation or debt-settlement case than with a bankruptcy case. The difference is that we don’t advise our clients to do what makes us the most money. We advise our clients to do what is BEST FOR THE CLIENTS. The truth is that if you qualify, bankruptcy is usually better for your bank account, better for your credit score, better for your family, and better for your life. Don’t believe the ‘scare-tactics’ out there.
The Myth That You Will Lose Your Stuff
Most people who file bankruptcy do NOT lose their stuff. To be sure, you need to consult your bankruptcy attorney. What you can keep depends on the state where you live and on what things you have. Many of my clients get Chapter 7 Bankruptcy even though they have houses or apartments, and they get to keep their houses and apartments! Many of my clients can keep their cars and household belongings too. The Bankruptcy Law provides Bankruptcy Exemptions that work like an invisible shield and protect specific amounts of your stuff. Don’t guess. Speak with an expert bankruptcy lawyer and be certain.
The Myth That You “Can’t File Bankruptcy Any More Because of the New Law”
So many of my clients believe that they cannot get bankruptcy anymore because of the law change in 2005. The truth about bankruptcy is that if you need a bankruptcy, most likely you CAN get a bankruptcy now. It is a little bit more expensive than it used to be, and there are a couple of extra hoops-you must jump through, and having a bankruptcy lawyer is much more important now than it used to be. So, it is a little harder. Don’t lose heart. Almost everyone who could get a bankruptcy before 2005 can get a bankruptcy now. The crazies that tricked congress into imposing the terrible 2005 laws on the American people scared our congress people with tales of ‘bankruptcy abuse’. However, almost five years later, it turns out that the new laws didn’t impact how many people were able to file bankruptcy. The bankruptcy filing rates are the same or higher now as they were before 2005. What does that show? It shows that the ‘dishonest debtor’ was mostly myth. The law doesn’t stop honest debtors and since most people in bankruptcy are honest debtors, the law hasn’t done much of anything but make everyone suffer a little more. If you need bankruptcy, you can most likely get bankruptcy.
That Myth That Married People Can’t File Bankruptcy Alone (Without Involving Your Husband or Wife)
This is another myth that scares a lot of people who need bankruptcy. Assuming you otherwise qualify for bankruptcy, you can ABSOLUTELY file bankruptcy alone, even if you are married. The bankruptcy official might want to see evidence of your spouse’s income (just to make sure he or she is not a super-millionaire) but your bankruptcy will not have anything to do with your husband or wife. It will not impact your husband or wife’s credit. In New York and New Jersey, it doesn’t even matter if your husband or wife has a lot of assets. The assets will be safe (so long as they REALLY belong to your spouse). Speak with a bankruptcy expert. Any of our bankruptcy lawyers can give you sound advice as to how you can file bankruptcy and leave your spouse out of it.
Where Do the Bankruptcy Myths and Lies Come From?
There are more myths about bankruptcy than I can list here. Most of the myths and lies and misinformation come from four sources:
1) People with good intentions who just don’t understand the facts (they rely on information they heard or read on a dishonest website). This is like the rumor mill. It might even be your friend or trusted family member. The person might be thinking about how the law used to be 20 years ago. Or the person might just have been misled by a website or someone he knows.
2) It is really difficult when a father or mother or sister or brother tells you something that is wrong. Don’t blame them. It is not their fault. Hundreds of millions of dollars are spent every year trying to mislead them. Even good, smart people can fall victim to these multi-million-dollar campaigns of lies.
3) Credit card companies that want to scare you away from bankruptcy because they want you to keep paying interest.
4) Debt-negotiation/debit and credit card consolidation companies that mislead people.
Debt negotiation and debt consolidation companies want your money. They can make more money if you go to them. Case for case, people make a LOT more money by selling debt-negotiation and debt consolidation than by selling bankruptcy. These companies have a financial incentive to scare you away from bankruptcy, even if bankruptcy is much better for you!
Yucky writers and financial advisors who want fame and fortune. They try to sound smart by saying ‘hard-sounding’ things. They want to build a fan base by saying controversial things. They don’t care about the truth, even though some of them have sites saying “The Truth” about this or that. Some of these writers are making money from big companies that pay them for their lies. They are evil and they hurt thousands of people with their confusing and dishonest information.