Top 5 Bankruptcy Myths Debunked

Bankruptcy has many misconceived stigmas to it. Frankly, there is a lot of misinformation out there, and much of the stereotypes regarding bankruptcy are just not true. With just over one million people declaring bankruptcy as of the 12 month period ending on September 30, 2013, you are not alone in this process.[i]

With Bankruptcy folklore continuing to emerge, our Chicago bankruptcy attorneys want to debunk some of these popular myths for your sake. Bankruptcy does not have to be a scary process, and we hope that this article helps clear some of the common bankruptcy myths you might have read or heard.

1. You Must Be Broke Before Filing Bankruptcy

A very common misconception. You should not wait until an emergency with bank restraints or until your home is getting foreclosed on to file for bankruptcy. A good rule of measure is to look at where you will be financially six months from now. If for worse, then Bankruptcy might be worth looking into.

2. Bankruptcy Will Discharge All Debts

NO! There are certain debt obligations that are nearly impossible to discharge. A great example is domestic support obligations (i.e., Child Support and Alimony). Also, as a result of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, student loans fall in a similar category as domestic support obligations. Student loans can be forgiven if you are able to prove hardship, such as a permanent disability, but even that standard is nearly impossible to meet.

3. If I File Bankruptcy, I Will Lose Everything I Own

If you file Chapter 13, you actually get to hang on to all your assets as long as you remain current in your payment plan. If you file Chapter 7, most exemptions provided in the State you file will let you keep your valuable assets. Our distinguished attorneys at the Law Office of William J. Factor are more than happy to discuss how your valuable assets can be protected in Bankruptcy.

4. Only Financially Irresponsible Individuals File for Bankruptcy

Definitely not true! Did you know Donald Trump filed for bankruptcy? Heck, even Mark Twain, one of America’s greatest authors, filed for bankruptcy. Unexpected-life changes always happen such as job loss, divorce, serious illnesses, etc. The Bankruptcy Code was enacted to protect the “unfortunate but honest debtor,” with the idea of giving a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt. Bankruptcy is meant to give you the fresh start you need!

5. I Can Only File Bankruptcy Once In My Lifetime

These popular bankruptcy myths are also not true. If you have received a discharge in a previous bankruptcy proceeding, that does not preclude you from filing again in the future. If you received your first discharge under a Chapter 7 Bankruptcy, you cannot receive a second discharge in any Chapter 7 case within eight years from the date that the first bankruptcy was filed. If you received your first discharge under Chapter 13, you cannot receive a second discharge in any Chapter 13 case that is filed within two years from the date that the first bankruptcy was filed.

Schedule a Free Consultation at (312) 878-6976 to Speak with a Chicago Bankruptcy Attorney

There are many more common misconceptions out there. Before you decide to take the leap into bankruptcy, consult one of our distinguished Chicagoland bankruptcy attorneys at the Law Office of William J. Factor, and learn the facts about how bankruptcy will affect you. At the Law Office of William J. Factor we pride ourselves in having the “Big Firm Expertise at Reasonable Rates.” Don’t hesitate, pick up the phone and call us at (312) 878-6976 for your free, no obligation consultation!