At Fugate Law Firm, we have been handling bankruptcy cases for a long time and we are always amazed by the myths we hear about bankruptcy. These myths are almost always completely untrue and, oftentimes, they frighten people away from finding relief from their debt. Below, we've provided information about the myths we hear most often.
Bankruptcy will ruin my credit.
Not true. This is only true if you have good credit prior to filing the bankruptcy. By the time most people realize that they are in financial trouble, the damage to their credit has already been. The late payments, overextended credit, high credit card balances, numerous credit cards, tax liens, and judgments are all harmful to your credit. Once the damage starts, it is hard to stop without some help. There are two ways to keep your credit heading in the right direction. The first is to try to pay off or reduce your debt. If you are having financial trouble to begin with, this is probably not an option. Bankruptcy can eliminate most or all of your debt. This can improve your debt-to-income ratio and make you more attractive to lenders.
Everyone will know I filed for bankruptcy.
Not true. Although filing for bankruptcy is a public record, it is not published in the newspaper or anywhere that an average person would see. In order for someone to find out that you filed for bankruptcy, he or she would have to intentionally search public bankruptcy records to find the information.
I will lose my house and car if I declare bankruptcy.
Not true. A vast majority of Chapter 7 and Chapter 13 cases that we handle involve clients who have one or more cars and / or a house. These clients do not lose their houses or cars. In fact, you may get a better interest rate on your car or possibly pay less for your car by filing for bankruptcy. These options are provided for by federal law and may be available to you. You do not get a free car, but the bankruptcy provides options for catching up on car payments. If a Chapter 7 is filed, it is necessary for you to be current on car payments and maintain the payments after the case is field.
If I file for Chapter 13 bankruptcy, I must pay back all of my bills.
Not true. How much is paid back to unsecured credits (credit cards, hospital bills, etc.) will most often be determined by household income. In many cases, you will pay nothing back to unsecured creditors (credit cards, hospital bills, etc.). Chapter 13 is not a debt consolidation. Read about Chapter 13 bankruptcy to learn more about the benefits of filing under Chapter 13.
It is harder to file for bankruptcy under the new bankruptcy laws.
Not true. Although the laws that were passed in 2005 changed the U.S. Bankruptcy Code, it is not harder to file for bankruptcy. The laws were put in place to prevent people from abusing the bankruptcy laws. Our firm has found that very few clients are adversely affected by the new laws. We help file more bankruptcies now than before the law was changed.
Debt consolidation is less harmful to your credit than a bankruptcy.
Not true. Contrary to what they want you to believe, a debt consolidation program is harmful to your credit. In fact, it is our opinion that it is more harmful to your credit than a bankruptcy.
You can't get credit after filing for bankruptcy.
Not true. Our clients report that they are bombarded with credit card applications immediately after filing for bankruptcy. Bankruptcy will get rid of the bad debt and allow you a clean slate to get good credit. FHA guidelines now will consider home loans to people 2 years after the bankruptcy is complete. Obviously you would have to meet income guidelines and other FHA guidelines to be approved for a loan but the bankruptcy will not stop you from getting a loan.
I filed for bankruptcy less than eight years ago and I am not eligible to file again.
Not true. Depending on what type of bankruptcy you filed under and the circumstances involved in that bankruptcy, you may be eligible to file again after only two years. Due to the nature of the economy, we have seen more people who have needed another bankruptcy more than any other time during our years in practice.
I cannot declare bankruptcy without my spouse.
Not true. A married person can file without his or her spouse. It is not uncommon for one spouse to have a lot of debt and the other spouse to have very little. Just because one spouse files does not mean that the other spouse will suffer negative effects.
The bankruptcy process is easy if I file with Attorney Fugate.
Well, this one is true. It is not a myth! Our firm can make it easy for you to file for bankruptcy. Attorney Kenneth Fugate can meet with you for a free consultation, answer your questions, and explain the process to you. We do not use confusing worksheets and we do not make you get your own credit reports. We do the work for you. Our staff is well trained and can help you get the information you need to file for bankruptcy.