11/17/2011 3:44 PM ET|
12 myths about bankruptcy
Will you lose your house and retirement savings? When will you be able to borrow money again? Get the facts on these questions and more.
Like most big, bad scary things, bankruptcy has a reputation based on a few tidbits of truth and a lot of embellishment. And like most creepy crawlies, it's not nearly as frightening once you know the truth.
With a mind toward declawing the monster, here are a dozen misconceptions about bankruptcy:
1. Everyone will know I've filed for bankruptcy. Unless you're a prominent person or a major corporation and the filing is picked up by the media, the chances are very good that the only people who will know about a filing are your creditors. While it's true that bankruptcy is a public legal proceeding, the number of people filing is so massive that very few publications have the space, manpower or inclination to run all of them, although some local newspapers do print the names of those who have filed in that community.
2. All debts are wiped out in Chapter 7 bankruptcy. You wish. Certain types of debts cannot be discharged, or erased. They include child support and alimony, student loans, restitution for a criminal act and debts incurred as the result of fraud.
3. I'll lose everything I have. This is the misconception that keeps people who really should file for bankruptcy from doing it, says Chris Viale, the chief operating officer of Cambridge Credit Counseling in Massachusetts.
"They think the government will sell everything they have and they'll have to start over in a cardboard box," Viale says.
While bankruptcy laws vary from state to state, every state has exemptions that protect certain kinds of assets, such as your house, your car (up to a certain value), money in qualified retirement plans, household goods and clothing.
"For most people, they'll pass through a bankruptcy case and keep everything they have," says John Hargrave, a bankruptcy trustee in New Jersey. If you have a mortgage or a car loan, you can keep the property as long as you keep making payments (like the rest of us).
4. I'll never get credit again. Quite the contrary. It won't be long before you're getting credit card offers again. They'll just be from subprime lenders that will charge very high 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," he says. "You don't have to go underground or something to get money." (Do you know your credit rating? Take MSN Money's quiz for an estimate.)
5. If you're married, both spouses have to file for bankruptcy. Not necessarily. "It's not uncommon for one spouse to have a significant amount of debt in their name only," Hargrave says. However, if spouses have debts they want to discharge that they're both liable for, they should file together. Otherwise, the creditor will simply demand payment for the entire amount from the spouse who didn't file.
6. It's really hard to file for bankruptcy. It's really not. Technically, you don't even need an attorney -- you can do the paperwork without one. However, going through the procedure alone is not recommended.
7. Only deadbeats file for bankruptcy. Most people file for bankruptcy after a life-changing experience, such as a divorce, the loss of a job or a serious illness. They've struggled to pay their bills for months and just keep falling further behind.
8. I don't want to include certain creditors in my filing because it's important to me to pay them back someday, and if the debt is discharged, I can't ever repay them. Bless you for even thinking about such a thing. You're no longer obligated to repay them, but you always have the opportunity. If your conscience won't let you sleep because you didn't pay your debts, there's nothing in the bankruptcy code that prevents you from doing that once you're back on your feet. But it is nearly impossible to leave any account with a balance out of your list of creditors. In general, all creditors receive notification of your bankruptcy filing, whether they are listed in the petition or not.
9. Filing for bankruptcy will improve my credit rating because all those debts will be gone. Filing for bankruptcy is the worst "negative" you can have on your credit report. Unlike other negatives, which stay on your report for seven years, bankruptcy can be there for 10 years, but you do get to rebuild your credit eventually.
10. You can't get rid of back taxes through bankruptcy. Generally speaking, this is true. However, there is such a thing as tax bankruptcy, says tax educator Eva Rosenberg, known on the Web as TaxMama.
11. You can only file for bankruptcy once. The truth is, you can file for Chapter 7 bankruptcy only once every eight years, says Justin Harelik, Bankrate's bankruptcy adviser. For Chapter 13 reorganization, you can file more often than that.
Of course, that doesn't make it a good idea.
"Multiple bankruptcies are really bad," Rosenberg says. "Many people get into the habit of once they've done it, it becomes a way of life. This is not good for your karma." Or your credit rating.
12. I can max out all my credit cards, file for bankruptcy and never pay for the things I bought. That's called fraud, and bankruptcy judges can get really cranky about it.
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60% of all bankruptcies, 1.6 million annually, over 900,000 families file bankruptcy because of Medical Services Bills Indebtedness. The USA is the only country in the world that attaches the "shame monocle of Bankruptcy:to Medical Bills Indebtedness.
The Medical Monopoly captured the Medical Billing market, Fixes Prices at 7% annually above inflation. This doubles the cost of Medical Services every 7 years. Congress has not invoked Anti-trust laws to Medical Cost Price Fixing. Why" Could it be Money? You bet it is, the Medical Monopoly from Hospitals, Drug Companies, and Insurance Companies spent $ One Billion dollars in 2008 and 2009 to defeat Universal Health Care to maintain the 7% cost increases annually.
You might ask who is benefiting from the "Price Fixing"? How about the CEO of United Health Care in 2009 walked away with $1.7 Billion ($1.700.000.000) in Compensation.
We have been "mugged" by our Government and the Health Care Monopoly for the last 40 years.
Of the 900,000 families that experience Health Care Bill Indebtedness Bankruptcy, over 50% had health insurance that did not pay.
The Price Fixing is a clever network of Computers tied together nationwide with a "hidden Application Program" imbeded to "tick up health care costs across the board. Want an example? An Aspirin at Walgreens is 11 cents but $34 or more at a hospital.
The Health Care Services Monopoly used Canada as a "whipping boy" to defeat health care. I have been to Canada, although not perfect, their Universal Health Care aka Single payer system works and they have no Medical Services Bills Indebtedness Bankruptcies. I went to Australia, the same, they have Universal Health Care aka Medicare and have NO Medical Services Bill Indebtedness Bankruptcies, the same in New Zealand.
It is outrageous, we have 55 million without health care access. It is outrageous we allow ourselves to be "snookered" into thinking we have no choice in stopping Medical Services Bills Indebtedness bankruptcies.
We are all, one major illness away from Medical Bills Bankruptcies. Today, the proposal is to give "vouchers" for Medicare. Which is "sneaky speak" more is coming out of your pocket and Seniors with Medicare, get ready to dig deeper into your out of pocket to pay for Medicare services if the Congress who is bought and paid for by the Health Care Services Monopoly.
The oposition Party of NO wants to repeal the new health care law, but offer no solution to stop the 900,000 annual bankruptcies.
This article, has some truth, but my sister lost her house at age 62 with a $ One Million bill from infections incurred after surgery, my daughter in law had bankruptcy, and as I point out to others, about the Outrage of Medical Cost Price Fixing and 900,000 families who are "labeled with the stigma of a bankruptcy" people open up, and tell you that they too, went through a Medical Services Bills Indebtedness Bankruptcy.
Having the "Bankruptcy" attached to Price Fixed Medical Services Bills Indebtedness is Immoral and wrong.
When I asked an Australian, if they had families go through Medical Indebtedness Bills Bankruptcy, he said "That is outrageous, we, in Australia, would not stand for it".
Why are we, Citizens of the USA, Standing for it?
Having filed bankruptcy last year due to loss of income, major medical bills and no insurance, my wife and I are finally feeling a bit of relief. House is still being foreclosed on, but that's to be expected when you suddenly go from making 90K+ to less than 40K a year, and can't swing a $2200 a month payment. Everything in this article is true, and good advice (a first for MSN?).
We got to keep our cars (both were paid for and worth under 5K, which is the max per car in CO), and all our household possessions, although we don't have much that's valuable. I still make payments to my doctor since I need continued treatment, but the credit cards are gone . . . forever (by choice). We will never go into debt again. If we can't afford to pay for it, we don't buy it. We will rent from now on.
Life is harder now that we have a strict budget, but much less stressful. Last note - use a lawyer if you are considering filing. It cost us $1500, but we made payments and he was worth every penny, especially preparing for court. Within months of the filing being completed, we started receiving (and still do) car loan and credit card offers, which we promptly throw in the recycling bin!
Don't be afraid! The banks screw people every day - screw 'em back! They just write it off anyway, and ruin your credit. So what? Credit is slavery! We are getting along just fine without it. We use our debit card like a credit card - and no interest! Life is good now, thanks to our BK.
Having gone through bankruptcy I found it to be a great learning experience even though at the time I felt horrible like you do now. Having lost a spouse to illness was a much more devastating experience and I tell you this because of the loved ones you would leave behind. Time is your most precious commodity not money so spent it with your loved ones.
I think this article is quite informative and since I have been through the bankruptcy process, I know it to be true. My husband and I filed for bankruptcy less than a year ago. He was a small business owner trying to keep his shop afloat. His generosity with customers, his business partner and use of our personal credit cards to get the shop out of debt got us into a mess. The shop went under and so did we. Bankruptcy was the last thing we ever thought we'd do and was the most humiliating experience I've ever had. We are church-going people who have never been in trouble with the law, pay our taxes and love our family. I know some people think you should never file for bankruptcy and say they would never do it, but until you have been there you don't know what you would do. We are now trying to get back on our feet, and hope to someday repay some of the debts we were forgiven.
Walked away from a house I was 75K underwater on, including a 30K 2nd mortgage. Had to file bankruptcy to get away from the 2nd mortgage. With it went the credit cards debts et al... Best thing I have done. Haven't used a credit card in over 2 years, if I can't afford it, I don't buy it.... right away. I actually have to save for my larger purchases. And what is really great is I'm not forking out thousands every month to debtors and bankers so it doesn't take long to save up for that 2K purchase. But if it weren't for the house situation I wouldn't have filed.
its the WORST time of your life while its going on..(chap 13) and you CAN'T get credit no matter what....but after its done you feel leaner and meaner......just learn from that mistake and dont do it again.......
It's like everything else in this country, the scammers and deadbeats have ruined it for everyone. There are a lot of people who legitimately need to file for bankruptsy, and then there are the lazy dirtbags who want to get everything for nothing and lack the self control to wait until they can afford to make a purchase.
Everyone seems to feel "entitled" to own a nice car, expensive electronics, designer clothes, etc. The reality is you are only entitled to have the things you can afford to buy WITHOUT ANY CREDIT. If we could somehow remove the scammers from the system we would be able to afford to help those who are truly in trouble becuase of legitimate reasons.
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