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- It's very difficult to file for bankruptcy: While it is not difficult to file for bankruptcy, it is recommended that you hire a bankruptcy attorney to ensure that it is done right and that alternatives to bankruptcy are fully explored.
- Only "deadbeats" file for bankruptcy: This is not true. Most people file for bankruptcy after a life-changing experience, such as a loss of a job, a serious illness, or a divorce. They've struggled to pay their bills for months and just keep falling further behind. Bankruptcy is a financial tool that could make sense for almost anyone, including people and companies known for their wealth or past business successes. Think of bankruptcy as your own little bailout plan.
- Everyone will know that you filed for bankruptcy: Not True. While bankruptcy records are public records, people are simply not going to look for your case among the thousands of cases that get filed each day. The only people who are going to know are your creditors, those who have access to the bankruptcy court record system, and anyone else to whom you decide to tell.
- You can't get rid of back taxes through bankruptcy: Generally speaking, this is true, but there are some exceptions. To have a chance of success at discharging your back taxes, you have to file all your delinquent tax returns and the taxes owed need to be at least three years old.
- You can only file for bankruptcy once: This is not true. You can file for Chapter 7 bankruptcy once every eight years. Although you can file a Chapter 13 bankruptcy more often, you can never file more than one bankruptcy case at one time.
- I can max out all my credit cards, file for bankruptcy, and never pay for the things I bought: If it sounds too good to be true, it probably is. This could result in fraud charges being pressed against you. A bankruptcy trustee reviews all your purchases right before your filing and determines if the debtor is suspected to have committed fraud.
- I will lose everything I own: This is not true. Every bankruptcy filing allows you to keep a certain amount of protected property (called “exemptions”). The amount of property you are allowed to keep varies from state to state. In Washington, for example, the home exemption is $40,000, the personal property exemption is $2,700, the motor vehicle exemption is $2,500, etc. For a full list of bankruptcy exemptions available in Washington please click here.
- I will never be able to own property again: This ia also not true. You will get credit card offers and be extended credit right after the discharge of your bankruptcy. There are even creditors that will lend to you while you are in bankruptcy.
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