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Bankruptcy Fact or Fabrication

Friends, families, and false sources of information give people wrong ideas about bankruptcy.  While some ideas may be facts, others are fabrications.  Here are some common fabrications regarding bankruptcy:

When creditors file lawsuits or take other actions against you, bankruptcy is no longer an option.

The opposite is true.  Filing bankruptcy is actually a financial remedy to use against creditor actions.  Upon filing a bankruptcy petition, an automatic stay goes into effect that puts a halt to lawsuits, foreclosure, levy, wage garnishment, and other creditor collection actions.  The courts give debtors relief in order to either put together a reorganization plan to pay creditors or to discharge the obligation to pay creditors altogether.

One spouse filing bankruptcy ruins the credit of the other spouse.

Spouses do not have to file bankruptcy jointly and while one spouse may file, the other may not have to file at all.  This single filing works when one spouse has debt that the other spouse does not have.  When spouses have credit cards and other assets only in their name, their credit goes unaffected.  State law also is relevant to this discussion.

You may lose your job if you file bankruptcy.

Title 11 USC § 525 (http://www.law.cornell.edu/uscode/text/11/525) of the Bankruptcy Code prohibits federal and private employers from terminating employment or discriminating against individuals with relation to employment who have filed bankruptcy.

The 2005 new bankruptcy law kept people from filing bankruptcy.

Despite the limitations imposed by the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), the number of bankruptcy filings actually increased on a steady trend from 2005 through 2010.  Even though the BAPCPA introduced more stringent income eligibility requirements for Chapter 7 and increased burdens on debtors in Chapter 13, people continued to file Chapter 7 bankruptcies more than any other type of bankruptcy, followed by Chapter 13 bankruptcies.

Get the right facts.  Most bankruptcy lawyers offer a free consultation to discuss your finances and discover whether bankruptcy is a viable solution to resolve your debt.

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