Myth 1: You will lose everything you own.
Every state, including Maine, has “exemptions” that allow you to keep certain kinds of property. For example, you are usually allowed to keep your car, your household goods and furniture, your retirement accounts, and some or all of the equity in your home. The fact is, over 95% of filers get to keep everything they own. It is important to remember, though, that Bankruptcy doesn’t always cancel out liens. That means if you want to keep secured property (where the lender can take back the property if you don’t pay) you will need to continue to make the payments after the bankruptcy.
Myth 2: Everyone will know you filed for bankruptcy.
It is true that bankruptcy is a “public” filing. But there is a huge amount of public information out there. It is highly unlikely that your specific situation will become generally known. Almost a million and a half people filed for bankruptcy in 2009. If you keep your bankruptcy private, the odds are very good that no one will ever learn of it.
Myth 3: Filing for bankruptcy hurts your credit for 10 years.
Bankruptcy is obviously a negative factor in credit rating. But it is important to remember that late payments and high balances are negative factors as well, and also hurt your credit. If you are considering bankruptcy, your credit rating is probably already quite damaged. The real question is, what is the best way to fix the problem. Bankruptcy can give you a fresh start. After that, if you carefully manage your credit opportunities, save some money, and pay your bills on time, you can often fully rebuild your credit in as little as two years.
Myth 4: You will never be able to own property again.
The truth is, in the future you can buy and own whatever you can afford. If you have the money or can borrow it, there are no laws barring you from buying homes, cars, recreational equipment, household goods, or anything else.
Myth 5: Both you and your spouse have to file bankruptcy together.
You can file together or separately, that is your choice. In many cases it makes sense for spouses to file together. For example, if you and your spouse are both liable for a debt that you want to discharge, then you will want to file bankruptcy together. Otherwise the creditor will just seek payment from the non-filing spouse. But when debts are owed separately or another reason exists and one spouse prefers not want to file, this is fine and it is definitely allowed by the court.
Myth 6: You are a bad person for filing bankruptcy.
Almost all consumer debtors are honest, hardworking citizens. Most file only after a disastrous financial misfortune such as a divorce, the loss of a job, or a serious illness. Especially in these tough financial times, filing bankruptcy is not a reflection on your character. A million and a half people filed for bankruptcy in 2009, and more are expected to file in 2010. In this economy it is often simply impossible to keep your head above water. There is no reason to struggle for years with unmanageable debt because of a feeling of moral obligation. Where bankruptcy is inevitable, waiting to file almost always just makes things worse.
Myth 7: You can pick and choose what to put into bankruptcy.
Unfortunately, this is not true. Under the law, when you file for bankruptcy you must list all your property and all your debts. People often prefer to leave out certain debts. They may want to repay friends or relatives separately, or avoid telling a favored creditor about the bankruptcy. But under law this is not possible. One of the most central rules of bankruptcy is this: When you come into bankruptcy court to ask the court for help in reorganizing your finances, you really must put all your cards on the table. In fact, you will be required to affirm under penalty of perjury that you have disclosed every debt.
But remember, this does not restrict your freedom to pay any debt you want to pay. There is nothing in bankruptcy law that keeps you from repaying any debt in full after the bankruptcy process is over.
Myth 8: You can’t get rid of back taxes in bankruptcy.
It is true that certain taxes like sales tax or withholding tax are non-dischargeable in bankruptcy. However, income taxes that are over 3 years old can be discharged.
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