Beating the Bankruptcy Boogie Man
By Heather Faucher | Posted on June 4, 2009 | Filed Under Bankruptcy
For many people, bankruptcy is just as scary to contemplate as the boogie man or monsters lurking beneath the bed. Sometimes, they have valid reasons to be reluctant to even consider the possibility of filing for bankruptcy. Other times, they’re just jumping at shadows or rumors meant to scare them back underneath their financial blankets.
Here are some common misconceptions about filing for bankruptcy:
1. Everyone will find out. Unless your company nickname begins with G and starts with M–or you’re rich and famous–chances are the major news outlets aren’t going to pick up on the news of your bankruptcy. The only people who should find out about your bankruptcy are those you personally tell. Okay, okay. And the judge, your creditors, and your bankruptcy attorney (you have an attorney, right? If not, you should definitely consider getting one ASAP).
2. I’ll lose everything. Again, not true. Chris Viale, chief operating officer of Massachusetts-based Cambridge Credit Counseling, says that this is the biggest myth that prevents people who should file for bankruptcy from doing so. “They think the government will sell everything they have and they’ll have to start over in a cardboard box,” Viale says. Bankruptcy laws vary from state to state, of course, but they all have exemptions to protect certain assets such as your house, your car, qualified retirement plans, and household goods and clothing. Check with your attorney to see which of your assets qualify.
3. Nobody will give me credit ever again. This is about as far from the truth as it gets. Credit card offers will most likely start pouring in again fairly soon–but beware. They’ll be from subprime lenders who will charge you an arm and a leg in interest rates. “There are innumerable companies that will provide credit to you,” says California bankruptcy attorney and trustee Howard Ehrenberg. “I don’t advise any of my clients to run out and run up the bills again, but if someone does need an automobile, they can go and will be able to get credit. You don’t have to go underground or something to get money.”
4. Filing for bankruptcy is really hard! Not at all. Technically, you don’t even need an attorney–but it’s definitely not recommended to go through bankruptcy proceedings alone. The process can be complicated, convoluted, and downright confusing for laymen. An experienced bankruptcy attorney will be well worth his or her weight in attorney fees when it comes time to take the bankruptcy plunge.
5. Only slackers file for bankruptcy This just isn’t true. Most people who file for bankruptcy do so because they’ve gone through some major life change, whether it be a divorce, death of a spouse, loss of a job, or severe sickness. They’ve struggled for months if not years to get caught up on their bills, and just can’t get ahead. Exactly the people who bankruptcy was designed to help–people just like you.
6. If I use it, I’ll lose it. Actually, you can file for Chapter 7 bankruptcy only once every eight years and more often than that for Chapter 13 reorganization–but you can’t have more than one Chapter 13 case open at the same time. Of course, that doesn’t make it a good idea. Multiple bankruptcies are bad for your credit rating–really bad.
7. Bankruptcy will be my “get out of jail free” card. Some not quite scrupulous people seem to think they can just max out all their credit cards, file for bankruptcy, and never pay for the things they purchased. Not so fast! That’s called fraud, and bankruptcy judges get really testy with consumers who think they’re pulling a fast one like that. Your bankruptcy trustee will review all the purchases made just before you filed your petition–and he or she knows what to look for. Just don’t even try it.
If your creditors are knocking down your doors and burning up your telephone lines, it’s definitely time for you to face the “boogie man” of bankruptcy and consult a qualified attorney. Conquer your fear–and your financial monsters–today.
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