10 Myths About Bankruptcy

Most people have at least some wrong information about bankruptcy. Irrational fears hold people back from utilizing this helpful process. We hope that by dispelling some of these widely held myths, we can help you to determine whether bankruptcy is the right course for you. The initial consultation with a bankruptcy attorney is free.

Myth I: Bankruptcy is difficult.

While there are many rules in bankruptcy and the process may seem confusing, it is not so difficult that you should avoid the benefits bankruptcy can afford you. If you have a competent lawyer representing you, the process should be straight forward for most consumers.

Myth II: If I file, I will lose all my property.

Because of several exemptions built into the bankruptcy law, most people who file for bankruptcy protection do not lose any property at all. Those with substantial property can usually keep their property if they agree to pay back some or all of their debt.

Myth III: If I file, I will never get credit again.

It is possible to rebuild your credit within months of filing bankruptcy. In many cases, clients report having an easier time obtaining credit after the bankruptcy freed them from so much debt.

Myth IV: If I file, I will lose my Pension, IRA, or 401(k).

In Maryland, these assets are exempt. You will keep your pension, IRA,
and 401(k) in bankruptcy.

Myth V: If I file, I will lose my job.

In many cases, employers will not find out about the bankruptcy, unless you choose to tell them. Either way, employers are not allowed to fire someone (or take other adverse action) for filing bankruptcy.

Myth VI: My bankruptcy will hurt my spouse's credit.

When one spouse files for bankruptcy protection, his or her spouse’s credit is generally not affected.

Myth VII: Bankruptcy will not allow me to pay the debts

I want to pay.
As a general rule, nobody will stop you from paying a debt you need to pay to retain property.

Myth VIII: Bankruptcy will not help me because I owe taxes.

While it is true that some taxes will not be discharged, others can be. There are many rules which an attorney can explain to you.

Myth IX: Filing bankruptcy will take too long.

The total time for a Chapter 7 bankruptcy without complications is as little as four months. However, the debtor receives the benefit of an automatic stay immediately after the petition is filed. The automatic stay means that creditors are generally not allowed to attempt to collect any debts from the debtor. The phone calls from creditors should end immediately after filing.

Myth X: Only deadbeats file bankruptcy.

Congress didn’t create the bankruptcy laws to help bad guys. The laws are there to help people get out of problems honestly. When good people have serious financial problems, they owe it to themselves and their families to consider bankruptcy.