Bankruptcy Myths

Everyone will know that I have filed bankruptcy. NOT TRUE. Chances are very good that the only people who will know about a filing will be creditors and the people you tell.

I will lose everything I have. FALSE. Most people who file keep everything they have.

I will never get credit again. GENERALLY FALSE. Under bankruptcy law, filing bankruptcy gets rid of most of your debt and is a positive step towards rebuilding your credit.

Filing for bankruptcy will hurt my credit. FALSE IN THE LONG RUN. While it is true that a bankruptcy filing will go on your credit record, your credit rating is generally already bad due to your inability to pay your creditors. As long as you are unable to pay creditors, your credit rating will remain bad. But once you eliminate all or most of that debt, you can start rebuilding.

Filing bankruptcy may cause more family problems and lead to divorce. NOT TRUE. Financial pressures caused by an inability to pay creditors leads to stress that in turn causes family problems. By eliminating the debt, you eliminate the stress and consequently the family problems associated with it.

Only deadbeats file bankruptcy. FALSE. Most people who file bankruptcy are good, hard working people who have fallen on hard economic times due to a loss of employment, a death or illness in the family, divorce, failure of a business or other economic crisis.

I can get out of my economic problems myself. GENERALLY FALSE. We are presently in hard economic times with high unemployment, tight credit and widespread uncertainty. If you have significant financial problems, the chances are things will only get worse unless you seek professional help from a bankruptcy lawyer.

I can transfer assets out of my name into someone else's name in order to preserve those assets. FALSE. This is a particularly bad idea since such a transfer without any money is fraud. In addition, it eliminates your ability to exempt such assets from the claims of a bankruptcy trustee.

I can use my retirement funds to pay creditors. GENERALLY A BAD IDEA. The purpose of such funds is to provide for your retirement, which will be defeated if such funds are used for creditors. In addition, accessing those funds creates a tax liability that will not be dischargeable if a bankruptcy filing becomes necessary. Besides, most people can exempt and keep all of their retirement assets in a bankruptcy filing.

Foreclosure has started so it's too late to save my home. NOT NECESSARILY SO. With a certain type of bankruptcy timely filed, a home in foreclosure may be saved.

I should pay family members back on a loan before I file bankruptcy. BAD IDEA. A bankruptcy trustee can go after those funds either from you or the family member involved if the transfer was made within the year prior to the bankruptcy filing.

I can settle some of my credit card debt for 50 cents on the dollar. BAD IDEA, unless doing so settles your financial problems. The Internal Revenue Code would provide, for example, where you settle a claim of $20,000.00 for $10,000.00, that you recognize $10,000 as "cancellation of debt income" and you will receive a form 1099 the following year. Debts discharged in a bankruptcy do not recognize COD income.

Call 616-942-0458 to speak to bankruptcy lawyer Dave Conklin about your financial situation and concerns. If you get the voice mail, we apologize for the inconvenience. Please leave a message with your name, number, best time to return your call.