Common Bankruptcy Misconceptions

Misconception #1: Everyone will know I’ve filed for bankruptcy. Although bankruptcy filings are a matter of public record, these are not updated regularly and only a person willing to go through so much trouble to research updated bankruptcy filings will know you filed for one.

Misconception #2: I will be left with absolutely nothing. Many people have this vision of an empty house with movers carting off all the furniture and belongings and the debtor left alone in an empty room. Bankruptcy laws have exemptions that protect certain kinds of assets such as houses, cars, household goods and clothing.

Misconception #3: I must be flat broke before I can file for bankruptcy. No, not true. The only requirement to file for bankruptcy is when you can no longer pay for all your maturing obligations.

Misconception #4: If I file for bankruptcy, I will no longer qualify for credit in the future. Well, to begin with, the fact that you’re filing for bankruptcy probably means you already have poor credit rating. Filing for bankruptcy will in fact show up in credit reports for several years, but it will not be permanent.

Misconception #5: I can’t buy a house anymore if I file for bankruptcy. Again, this is simply not true. A lender will probably seek more security in the form of higher interest rates, but as a whole they won’t really mind if you have filed for bankruptcy as long as you can give a sufficient down payment.