5 Myths About Bankruptcy

1.  You lose all of your property.

This is definitely a myth.  The whole policy of bankruptcy is that we want to leave people with more than a barrel around them when they can't pay their debts.  Basically one who files bankruptcy is allowed to keep any property that is exempt and any property that is secured and he can still pay for.  I will say that the majority of my bankruptcy clients have not had to give up property.  Texas has a pretty liberal set of exemptions allowing them to keep all of it.

2.  It takes a long time.

Not really.  Chapter 7 cases can usually be concluded 3-4 months after filing barring any unforeseen hiccups.  Chapter 13 can take 3-5 years but that is because you are in a payment plan that takes that long.  So yeah, it takes a while but by the point you are making payments all of the bankruptcy matter is pretty much settled.  As long as you keep up your payments to the trustee and to other secured creditors it should be smooth sailing.

3.  It is expensive.

Well nothing with a lawyer is cheap...right?  There are legal fees and filing fees.  What I tell most of my clients though is, "Look what you are getting in return."   You are cancelling out a large sum of debt, or you are lowering your car payment, or you are getting to keep your house.  In the grand scheme of things the amount of attorney fees you are paying is well worth it.  I personally charge flat fees for my services so you know what you are getting into before you start.  No surprises.

4.  It ruins your credit.

It can.  But only for a short time.  Further, if you are to the point where you need to file Bankruptcy chances are your credit is not that great to begin with.  Most of my clients see a rise to their credit score within fifteen months of their discharge in Chapter 7.

5.  You'll never be able to buy a house.

Never say never.  A lot of factors go into what qualifies you for a home loan--down payment, past home loan history, etc.  So never count yourself out.  There is no law that says that a bank is not allowed to lend you money after bankruptcy.  It is only a matter of if they are willing.  So keep that in mind.