Bankruptcy FAQSometimes, a fresh start makes sense–if you can get past what
you think you know.
Here’s a simple list of the most common Bankruptcy FAQ's. See how bankruptcy
affects your credit and your possessions.
Bankruptcy has a reputation based on a few tidbits of truth and lots of embellishment, it’s not
nearly as frightening once you know the truth.
1. ALL DEBTS ARE WIPED OUT IN BANKRUPTCY.
Certain types of debts cannot be erased. They include child support and alimony, student loans and debts
incurred as the result of fraud. If you’ve defrauded someone and a judgment has been obtained
against you, they won’t be erased either.
2. MY FILING WILL BECOME PUBLIC KNOWLEDGE.
Unless you are a prominent person or major corporation and the filing
is picked up by the media, the chances are very good that the only people who will know about a filing
are your creditors.
3. I'LL LOSE ALL OF MY PROPERTY.
This is the misconception that keeps people who really should file for bankruptcy from doing it. While
the bankruptcy laws vary from state to state, Florida has exemptions that protect certain kinds of assets,
such as your house, your car (up to a certain value), money in qualified retirement plans, household
goods and clothing.
4. I'LL NEVER GET CREDIT AGAIN.
Quite the contrary. It will not be long before you are getting credit card offers again. They will just
be from lenders that may charge high interest rates. However, if you are planning to buy a house or
a car, you might want to do that before you file. Those loans will be tough to get, and the higher interest
rate on such a large purchase would make a significant impact on your payments. Also, if you have a
credit card with a zero balance on the day you file for bankruptcy, you do not have to list it as a
creditor since you do not owe any money on it. That means you might be able to keep that card even after
5. IF YOU'RE MARRIED, BOTH SPOUSES HAVE TO FILE FOR BANKRUPTCY.
Not necessarily. It is not uncommon for one spouse to have a significant amount of debt in their name
only. However, if spouses have debts they want to discharge that they are both liable for, they should
file together. Otherwise, the creditor will simply demand payment for the entire amount from the spouse
who did not file.
6. ONLY DEADBEATS FILE FOR BANKRUPTCY.
Most people file for bankruptcy after a life-changing experience, such as a divorce, the lose of a job
or a serious illness. They have struggles to pay their bills for months and just keep falling further
7. I DO NOT WANT TO INCLUDE CERTAIN CREDITORS IN MY FILING.
It is important to me to pay them back someday and if the debt is discharged,
I can not ever repay them. You are no longer obligated to repay them, but you always have that opportunity.
If your conscience will not let you sleep nights because you did not pay your debts, there is nothing
in the bankruptcy code that prevents you from doing that once you are back on your feet. But bankruptcy
is an all-or-nothing deal, so you have to include all your creditors in the petition.
8. FILING FOR BANKRUPTCY WILL IMPROVE MY CREDIT RATING.
Because all those debts will be gone. 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 ten (10) years.
9. YOU CANNOT GET RID OF BACK TAXES THROUGH BANKRUPTCY.
Generally speaking, this is true. However, there is such a thing as tax bankruptcy. To get a shot
at it, you have to file all your returns and the taxes owed need to be at least three (3) years old.
10. YOU CAN ONLY FILE FOR BANKRUPTCY ONCE.
The truth is, you can only file for Chapter 7 bankruptcy once every eight years. For Chapter 13 reorganization,
you can file more often than that, but you can not have more than one case open at the same time.
11. I CAN MAX OUT ALL MY CREDIT CARDS.
I can file for bankruptcy and never pay the credit card companies for the things that I bought. That
is called fraud. The credit card companies in your case will review all your purchases right before
your filing. They know what to look for and they can file objections to your bankruptcy discharge.
If we haven't answered your questions with our Bankruptcy FAQ, contact