We hear misconceptions every day about what bankruptcy means, and what it means for you. Most of these common misconceptions occur because the Bankruptcy Code is confusing. We want you to know the truth about bankruptcy. Below we have listed some of the most common myths and misconceptions regarding Bankruptcy. For further information, browse our Chapter 7 bankruptcy FAQ page, Chapter 13 Bankruptcy FAQ page, or Contact Us.
Common Bankruptcy Myths
Bankruptcy is only for people looking for a last resort – MYTH
Bankruptcy is for people overwhelmed by debt related to credit cards, medical bills, an unreasonable mortgage, or a number of other reasons
People will know that you filed bankruptcy – MYTH
People are always concerned that family or friends will find out that they declared bankruptcy. While Corporate bankruptcy is listed in the newspaper, personal bankruptcy is not. The debtor privacy in bankruptcy is protected. Only a credit check will reveal your bankruptcy. It is your decision to let anyone else know about your bankruptcy.
You Cannot Discharge Secured Debt (Car Loan or Mortgage) in Bankruptcy – MYTH
You can discharge secured debt such as a mortgage or car loan in bankruptcy. Usually this is an option for people who absolutely cannot keep up with the payments or wish to let go of property that is now worth less than the loan.
It is also possible in Chapter 13 to negotiate down the amount of your auto loan, or strip a second or third mortgage (link to stripping a second (or third) mortgage).
Personal loans are not dischargeable – MYTH
Many people believe when they took out a personal loan for school, that it will be treated like a student loan, which is usually not dischargeable. However, almost all personal loans can be discharged through bankruptcy.
Bankruptcy preparers and debt consolidators are better options than bankruptcy – MYTH
Preparation services and consolidators can make these options sound good and less expensive, but they are truly exposing debtors to greater risks, potentially higher fees, far less legal protection, and no advice related to your unique financial situation.
Many people see the ads on T.V. to avoid bankruptcy and to avoid legal fees by hiring debt consolidation companies and non-attorney bankruptcy preparing services. However, what they do not tell you is that these services offer you much less legal protection, and usually end up costing you much more in the long run. Debt consolidation generally has significant tax consequences, and preparation services have no legal recourse for shoddy or careless work which may leave you owing thousands of dollars.
Your creditors will get your assets in bankruptcy – MYTH
Almost all property can be protected by state and federal exemptions in bankruptcy. There are very few cases where people will lose personal property in a bankruptcy. Our experienced attorneys can help you avoid this possibility with creative use of the Bankruptcy Code.
Bankruptcy ruins your credit forever – MYTH
Over time bankruptcy will generally improve your credit score. The largest aspect of your credit score is debt to income ratio, and bankruptcy will help you significantly lower your debt.
Contact Our Pennsylvania Bankruptcy Lawyers Today
Our attorneys are ready to discuss your concerns and provide answers. Our attorneys represent clients in Montgomery, Berks, Lancaster, and Chester Counties in Pennsylvania.