TOP 10 Bankruptcy Myths
There are a lot of Urban Myths surrounding bankruptcy:
Myth No. 1: Consumers can file for bankruptcy as many times as they like. – Some strict limitations have been set by the new law. Debtors will not be able to file Chapter 7 bankruptcy if they’ve been through a Chapter 7 within eight years of the new filing. If they want to file for Chapter 13, they will not receive a discharge within two years of a previous Chapter 13 discharge and within four years if they were discharged from a Chapter 7, 11 or 12 bankruptcy.
Myth No. 2: Filing for bankruptcy will give a consumer a new start with credit. – Not necessarily. Bankruptcy is a negative mark on the credit report that will impact a credit score on a consumer’s credit profile.
This mark can lead to higher interest rates, the inability to rent an apartment and difficulty getting a job.
Myth No. 3: The car, house and boat can be kept without having to pay off the loans when included in the bankruptcy file. – You can’t keep them without paying the loan. Assuming that when you bought the car, for instance, you gave the lien on the car for the purchase price.
He adds that if the vehicle is repossessed and you file before the car or boat is sold you can get it back.
In order to do that you have to make sure there’s insurance, and you have to agree to pay off the loan in order to keep it.
Myth No. 4: When one spouse files bankruptcy it will not affect the other’s credit. – It will if they have one or more joint accounts.
There are laws against causing the bad credit of one spouse to be automatically attributed to the other. But, as a practical matter, filing could have a negative effect on the other spouse. It shows up as a bankrupt account.
Marriage overall is handled differently from other joint accounts. For example, say a sister files for bankruptcy, provided the brother continues to pay off the account, the brother will not be affected by the bankruptcy.
Myth No. 5: Filing bankruptcy could cost you your job. – Technically, this is not true. Bankruptcy experts say a current employer can check an employee’s or potential employee’s credit report provided they have the employee’s written permission.
Currently, a statute under the bankruptcy code prohibits discrimination against an individual who is or has been a debtor.
However, it prohibits an employment action ‘solely’ because the individual is or has been a debtor. Courts have interpreted this language very strictly, however, so if the employer proves that one or more other reasons for the action also were at play, and not solely the bankruptcy, the employer prevails.
Myth No. 6: Purchasing a home and obtaining new credit after a bankruptcy is out of the question. – Actually, creditors and lenders will look at a consumer’s most recent credit history more than the past.
Each lender varies in their business practices. However, the length of time since the bankruptcy was filed is often taken into consideration by lenders. Also, most lenders will factor in other items, such as length of time in current employment, income, etc., along with the credit history, in order to make a decision.