To people, bankruptcy is a bad and shameful thing to do and should not be done but it is not true as most people have heard the common myths and have misunderstandings about bankruptcy which the creditors try to convince you because it will be their loss. Here are some common myths about bankruptcy-
- Bankruptcy is for people who don’t want to pay bills or have a huge amount of outstanding bills.
It is not true, most of the creditors are inflexible and do not understand the debtor’s situation, they want all their money immediately and they harass the debtor and pressurize them. And those who pay their bills on time can also file for bankruptcy as they might be able to pay their debts but do not have a decent living standard.
- Married couples have to file for bankruptcy together.
It is not true at all, depending on the circumstances only one spouse can also file for bankruptcy alone.
- You will lose all your assets-
Illinois state law allows exemptions and most assets come under them. In reality, bankruptcy can save your assets as it puts an automatic stay on collection efforts and stops foreclosures.
- Filing for bankruptcy is shameful and immoral.
A lot of people have filed for bankruptcy, it is nothing to be shameful of. Instead, it shows that you admitted that your financial future was not secured and you wanted to start a new financially secured life. A lot of people file for bankruptcy. And famous people like Walt Disney, Henry Ford, Milton Hershey all have very successful businesses after filing for bankruptcy.
- Filing for bankruptcy is difficult or not possible.
There are attorneys specializing in bankruptcy. They can help you the most. If you want to file for bankruptcy you should go to an experienced bankruptcy attorney for help. For a good bankruptcy legal counsel contact Recovery law group-(888-297-6203).
- When filing for bankruptcy all your debts will be discharged.
In chapter 7 and chapter 13 bankruptcy debts like a student loan, alimony, some kind of taxes, fine for the criminal act are not discharged. All collections for student loans are stopped till your case is open.
- Can file for bankruptcy only once.
There are some restrictions but people who are in need can file more than once.
- Everyone will know that you filed for bankruptcy.
The court might ask your employer to stop your payments but are not informed that you filed for bankruptcy. In most cases, no one will even know.
- I have too little or too much money to file for bankruptcy.
There is a means test that you will have to give and that will show whether you can apply for bankruptcy or not.
- After filing for bankruptcy you cannot get a new credit card.
Not true at all, you can get secured credit cards and even normal ones after your credit score increases after a while.
- Income taxes cannot be discharged.
Not true, taxes older than 3 years from the date of filing can be discharged, but some taxes cannot be discharged altogether.
- In chapter 13 you will have to pay all the debts in full.
No, a vast amount of unsecured bills are not even paid back to the creditors.
- It is right to cash out the pension or 401(k) or IRA before filing.
No, if you cash out then it will come under nonexempt assets and will be taken from you.