Thomas F. Miles, Attorney and Counselor at Law
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How many of these personal bankruptcy myths have you fallen for?

There's a lot of misinformation out there, these days. Unfortunately for those dealing with unmanageable debt, there are those who are more than willing to pass untruths around. After all, creditors want you to believe that bankruptcy should only be the last resort of irresponsible people, which brings us to:

Myth No. 1: Bankruptcy is the result of irresponsibility or a moral failing.

Do you want to know what most personal bankruptcies are caused by? Medical debt. Over the last decade, health insurance deductibles have risen seven times faster than incomes, so it's no surprise that 57 percent of consumer bankruptcies in 2009 were caused by unpaid medical bills.

Myth No. 2: You're better off paying your debts off over time.

If your debt load is large enough for you to be considering bankruptcy, you probably won't be better off financially if you knuckle down and pay off those debts. If the total amount you owe is more than 50 percent of your annual income and you don't see any way to pay them off within 5 years, reconsider bankruptcy. It's probably your quickest path to a debt-free life.

Myth No 3: You'll lose everything if you file.

Most people who file for Chapter 7 don't really have any assets their creditors want. Most small assets aren't worth much on the resale market, and any others you have are probably encumbered with excessive debt. Those with houses they want to save can often do so by filing for Chapter 13.

Myth No. 4: A bankruptcy will ruin your credit forever.

A bankruptcy stays on your credit report for seven to 10 years, but that isn't the only thing that determines your credit rating. In fact, a report from the Federal Reserve Bank of Philadelphia found the average credit score of Chapter 7 filers jumped more than 81 points once their bankruptcies were finalized.

Myth No. 5: Bankruptcy wipes all of your debt away.

While most of the news about bankruptcy is good, it's important to understand that it can't just wipe away all your debt. Some types of debt like child and spousal support aren't dischargeable in bankruptcy at all. Others, like tax debt and student loans, are theoretically dischargeable but only in very specific cases.

Don't let myths and falsehoods about bankruptcy deter you from calling a lawyer. Many bankruptcy attorneys provide a free consultation so you can ask whatever questions you may have. Filing personal bankruptcy could just be the break you need to resolve your debt problems.

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Thomas F. Miles, Attorney and Counselor at Law
152 West Park Ave
El Cajon, CA 92020

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