Top Ten Bankruptcy Myths

Myth 1:
My credit will be hurt for 10 years after filing for bankruptcy.

This is not true, most people will actually see their credit score increase in the years following a bankruptcy filing. The actual bankruptcy filing stays on a credit report for 10 years, but if you keep your bills current following a bankruptcy filing and make sure your credit report is accurate you should see improvement on your credit score in as little as two years.

Myth 2:
The new bankruptcy law makes it impossible to file for bankruptcy

This is not true, the new bankruptcy law passed in 2005 just put in more qualifications in order to file for bankruptcy. Most people still qualify for bankruptcy protection under the new law.

Myth 3:
If I file bankruptcy will my family find out.

In most cases the only way your family or friends will find out you filed for bankruptcy is if you tell them. It is true that a bankruptcy filing is a public record, but most people do not spend the time required to find out if an individual has filed for bankruptcy protection. In our practice area the local papers do not publish lists of people who have filed for bankruptcy.

Myth 4:
I do not need to list all my debts and assets when filing a bankruptcy petition.

This is not true, when you file for bankruptcy protection you need to list all your debts and assets. This includes debts owed to family members. If you want you can always pay back creditors after you get your bankruptcy discharge.

Myth 5:
Both spouses need to file bankruptcy together.

You can file bankruptcy together as a married couple, or you can file bankruptcy individually if you are married, depending on what is best for your circumstance.

Myth 6:
Creditors can still contact me after filing for bankruptcy.

Once you file for bankruptcy protection creditors are prohibited from contacting you by the bankruptcy automatic stay. The automatic stay keeps creditors from contacting you while the bankruptcy case is pending, it also stops all wage garnishments and bank levies.

Myth 7:
I will lose my property after filing for bankruptcy.

In many cases most assets are exempt after filing for bankruptcy. It is important to contact an experienced attorney to meet to determine the proper exemptions for your bankruptcy case. The exemptions available in Minnesota are complicated and require a skilled attorney to make sure they are done correctly.

Myth 8:
I should pay back all my friends and relatives before I file for bankruptcy.

This is not true. You should not pay back friends or relatives before you file for bankruptcy. If you are in financial difficulty and you think you may need to file for bankruptcy protection, consult with an experienced bankruptcy attorney before transferring any assets or paying back relatives.

Myth 9:
I should use my retirement money to pay down my debt.

Before you use any retirement money to pay outstanding debt you need to consult with a bankruptcy attorney. In many cases using the retirement money will only delay the filing of a bankruptcy, and then you will not have any money for retirement. In most cases the retirement money is exempt in the bankruptcy.

Myth 10:
Overspending is the primary cause of bankruptcy.

This is not true, in most cases bankruptcies are caused by a job loss, medical bills, small business failure, or divorce. These are things that can happen to anybody and when they happen bankruptcy is the only solution.