As a long-time Miami bankruptcy attorney, Michael C. Compo knows that there is a lot of misleading -- and often just plain wrong -- information about filing for bankruptcy. If you have questions about bankruptcy, whether Chapter 7 or Chapter 13, you need to contact and obtain legal advice from a professional south Florida bankruptcy lawyer, like Michael C. Compo. However, some of the more common myths about bankruptcy can be ended right here.
Myth 1: Bankruptcy will eliminate all debt.
Fact: While bankruptcy will allow you to get rid of some debt, either through a consolidated payment plan or a discharge of all monies owed, certain debt types, like alimony, child support, student loans, and taxes will not be eliminated and you will be expected to pay them in full.
Myth 2: Filing for bankruptcy means an end to credit.
Fact: While you will be paying at higher interest rates for some time, following your bankruptcy filing, you will still be able to get credit. The interest rates may be higher than you would prefer, but they will not be astronomical.
Myth 3: It is difficult to qualify for and to get through bankruptcy.
Fact: The most difficult decision you will face is whether or not to file for bankruptcy in the first place; a qualified bankruptcy attorney will help you determine your debt load and whether or not bankruptcy is the right option for you. Once you have decided to file, your bankruptcy attorney will take care of all of the required legal paperwork, will address the court, and will negotiate with creditors, if needed.
Myth 4: Credit will be ruined.
Fact: While a bankruptcy filing will remain on your credit report, as a part of your credit history, for seven to 10 years, your credit rating will improve over time, as you work to re-establish your credit. Remember, too, that it is likely your credit score was already negatively affected if you have fallen behind in payments to credit cards or have had your wages garnished by creditors.
Myth 5: Everything will be lost.
Fact: Many of your possessions and assets are protected through specialized bankruptcy exemption laws; it is common that most people who file for bankruptcy do not lose any of their assets or property.
Myth 6: The new bankruptcy laws make it difficult to file for bankruptcy.
Fact: Actually, the new bankruptcy reform act just changed how the debtors qualify for Chapter 7 or Chapter 13 bankruptcy. You are still able to file for bankruptcy protection and get the same debt relief as before the bankruptcy laws were changed.
Myth 7: Filing for bankruptcy means everyone will know one's private business.
Fact: While bankruptcy filings are a matter of public record, people have to go looking to find who has filed. Unless your friends have access to the bankruptcy court record system, the only people who will know are those that you tell.
Myth 8: Filing for bankruptcy means you are a bad person.
Fact: Filing for bankruptcy has nothing to do with your worth as a person: it simply means that you have found yourself in a position where you cannot pay-off your debts and you need help. Many hard working, good people have had to file for bankruptcy, whether because of medical reasons, loss of a job, a divorce, or other serious event in their life. Bankruptcy exists to protect those who find themselves in over their heads, financially speaking.
Myth 9: Even if you file for bankruptcy, creditors will continue to harass you.
Fact: As soon as you file for bankruptcy -- whether Chapter 7 or Chapter 13 -- automatic protections immediately go into place to protect you from collections people. Your creditors are not allowed to contact you -- not by phone, not by postal mail, not electronically, not in person -- in effect, a restraining order is put in place, giving you some breathing room.
Myth 10: Bankruptcy does not allow you to get rid of back taxes.
Fact: Income taxes that are over three-years old can be discharged through bankruptcy. However, there are several qualifications that have to be met before this can happen. Note that sales taxes cannot be wiped-out through a bankruptcy filing.