Bankruptcy is a fairly common but widely misunderstood topic. There are plenty of myths going around about bankruptcy that are quite frankly untrue. If you or someone you know is considering filing for bankruptcy, talk to a Georgia bankruptcy attorney to figure out your options.
Meanwhile, here are the top eight bankruptcy myths and why they are absolutely false.
- Everything Is Lost in Bankruptcy
This is false. People who file for bankruptcy don’t lose everything they own. While the aim of bankruptcy is to pay back creditors to the greatest extent possible, loss of property hardly ever happens. There are exemptions to your assets that can be liquidated for that purpose. For example, many states have exemptions on homes. Georgia has a number of bankruptcy exemptions that are pretty complex and are best talked about with an experienced bankruptcy attorney.
- Bankruptcy Will Discharge All Debt
Also false. While bankruptcy provides relief from many debts, there are some that are not relieved. They include recent taxes, child support, and debts accruing from fraudulent activity. Student loans are also unlikely to be discharged.
The debts that do get discharged include credit card debt, medical bills and personal loans.
- Bankruptcy Completely Ruins Credit Eligibility
No, bankruptcy does not completely ruin your credit. In fact, bankruptcy can actually improve your credit. After getting discharged, you owe no debt. Once that’s done, your credit begins improving immediately. If you pay back all new debts going forward, you can reestablish good credit in less than a year. Many people who file for bankruptcy go on to get car loans and mortgages after rebuilding their credit.
- Filing for Bankruptcy Is Declaring Failure
Bankruptcy is not synonymous with failure. It is not even a bad thing. Up to 90% of all bankruptcies are actually filed because of reasons beyond individuals’ control like job loss, sudden illness or divorce. Filing for bankruptcy is not an admission of failure or fiscal irresponsibility. It is actually a sign of honesty and responsibility. Keep in mind that bankruptcy is a legal process, not a moral one.
- Property Can be Hidden or Transferred before Bankruptcy
Transferring property or hiding it before filing for bankruptcy is illegal. The Department of Justice rigorously investigates cases of fraudulent transfer and concealment of property before filing for bankruptcy. All such transfers must be brought to the court’s attention in the bankruptcy petition.
- Certain Debts Can be Excluded from a Bankruptcy Filing
By law, all debts must be listed in a bankruptcy petition including credit card debts and debts owed to family members and friends.
- Debtors Must be behind on their Bills to File for Bankruptcy
Individuals do not have to fall behind on their debt payments to file. Even those who are current on their payments can file for bankruptcy. Often, people cash in on their savings, home equity lines and even retirement accounts to stay afloat, only to end up filing for bankruptcy later on. Retirement accounts can never be touched by the bankruptcy court, so speaking with a bankruptcy lawyer before getting into these accounts could save you lots of money. Filing sooner can save you from that perilous race to the bottom.
- People Who File for Bankruptcy Get Publicly Ridiculed
The truth is that very many people file for bankruptcy and the process is carried out without getting picked up by the media. In fact, the only people who find out about the bankruptcy are creditors and the people the debtor confides in. Only prominent persons and corporations get media attention when filing for bankruptcy.
If you or your company is deep in debt and you’re considering filing for bankruptcy, consult with a Georgia bankruptcy attorney on how to go about the process.