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20 Common Bankruptcy Myths and Misconceptions

MYTH #1: If I file bankruptcy, I will be forced to give up my cars, my house and all my belongings.

The truth is that most people who file for bankruptcy protection do not have to give up anything at all. The bankruptcy laws allow you to exempt or protect most household goods and items, vehicles, tools of the trade and most personal effects. In most cases, your property can be completely exempted, but talking with your lawyer is the best way to know for sure.

MYTH #2: Filing for bankruptcy will destroy my credit.

By the time most people decide that filing for bankruptcy is the right choice for them, they may have already missed paying on their credit cards, or they may have been unable to make their mortgage payments or car loan payments. In all likelihood, their financial problems have already resulted in a low credit score. Your credit can be rebuilt after filing for bankruptcy, and a bankruptcy filing only stays on your credit record for a set period of time.

MYTH #3: Filing for Bankruptcy Costs Too Much Money.

In most instances, our clients pay relatively small legal fees when viewed against the amount of debt that they will be wiping out by filing for bankruptcy.

MYTH #4: You have to give up all of your vehicles if your file for bankruptcy.

MYTH #5: You must give up your home if your file for bankruptcy.

MYTH #6: The bankruptcy trustee or your creditors will come to your house and will take pictures of everything you own.

MYTH #7: If you have any money in a bank account when you file for bankruptcy, you will have to give all of it to the bankruptcy trustee.

MYTH #8: You do not have to list all of the property you own if you file for bankruptcy. You can pick and choose what you list and what you don't list.

MYTH #9: All debts are wiped out in a Chapter 7 bankruptcy.

MYTH #10: You cannot wipe out your credit card debts by filing for bankruptcy.

MYTH #11: You can wipe out all of the back child support you owe by filing for bankruptcy.

MYTH #12: If you are currently paying alimony or spousal support, all of your obligations to pay will be ended by filing for bankruptcy.

MYTH #13: The IRS will audit all of your past tax returns and will examine all your financial records if you file for bankruptcy.

MYTH #14: If you file for bankruptcy, you cannot wipe out any income tax debt, regardless of how old the claim is.

MYTH #15: If you file for bankruptcy, you will never be able to get new credit to buy a car, a house or anything else.

MYTH #16: You will never be able to rent an apartment or a home if you file for bankruptcy.

MYTH #17: Everyone will know that I have filed for bankruptcy.

MYTH #18: You can only file for bankruptcy once.

MYTH #19: If you're married, both spouses have to file for bankruptcy.

MYTH #20: If your former spouse files for bankruptcy on a joint debt, his or her bankruptcy will discharge your obligations on that same joint debt.

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