Common Bankruptcy Misconceptions

Perhaps the biggest misconception about filing bankruptcy is that you will lose all of your property. We've discussed that previously here, with it being important to note that you will not lose all of your property if you file. Beyond that, however, there are still misconceptions regarding filing bankruptcy - some would even say stigmas - that can be easily addressed.

The first of these is that if you file bankruptcy everyone will know about it. Now, while filing bankruptcy is technically part of the public record, for the average person no one would ever know about it unless they knew exactly where to look for it. People also worry about their employers finding out about a bankruptcy filing, which will not happen unless there is a wage garnishment involved in the bankruptcy and the employer needs to be notified to stop the garnishment.

Another common misconception is that after filing bankruptcy, a person can never get credit again. The truth, however, is that after your discharge it is often much easier to obtain credit than it was prior to filing bankruptcy. To be sure, credit card applications will be rolling in once you've filed, and a few years after your discharge you should be able to obtain financing. Like anything else, your bankruptcy attorney can discuss post filing options to rebuild your credit.

There is also the misconception that bankruptcy will eliminate all of your debts, or that you can pick and choose which creditors to list on the petition. Neither are true. For one, bankruptcy does not eliminate student loans, secured debts (unless that property is going to be surrendered, upon which the deficiency balance can be eliminated), taxes, child support, parking tickets, and other debts that your bankruptcy attorney can familiarize you with. In much the same vein, you cannot pick and choose which creditors you would like to file bankruptcy on. All of your debts, whether secured or unsecured, dischargeable or nondischargeable, are included on your bankruptcy petition. All of your unsecured debt will be discharged in a Chapter 7 bankruptcy, not just the ones you prefer. Consult your bankruptcy attorney for further information.