Myths about filing a bankruptcy case are everywhere and may prevent countless people from gaining the fresh start that bankruptcy offers. Here are five of the biggest myths about filing a bankruptcy case.
Myth #1: Saying “I Declare Bankruptcy” in a Public Place Is the Same as Filing for Bankruptcy
This approach is popular on television (e.g., Michael Scott on The Office) but a simple declaration does not file a bankruptcy. To file bankruptcy, you have to submit a petition, a list of creditors (a matrix), and other documents, usually electronically, in the clerk’s office at your bankruptcy court.
Myth #2: You Can Only File Bankruptcy Once
You should not avoid bankruptcy filing because you fear that you may run into future financial troubles and have used up your chance to file for bankruptcy. The law takes future hardships like job loss or a medical emergency into consideration. You can file more than one bankruptcy case and have your debts discharged. You can receive a discharge from under a chapter 7 bankruptcy case once every eight years. You can receive a discharge from a chapter 13 bankruptcy case every two years. If you obtain a discharge in a chapter 7 case, you have to wait six years before getting a discharge in chapter 13. If you get a chapter 13 discharge, then you need to wait four years to obtain a discharge from a chapter 7.
Myth #3: You’re a Failure and a Bad Person if You File for Bankruptcy
Bankruptcy filers are not bad people. Most bankruptcy filings result from events in people’s lives beyond their control: job loss, medical bills, divorce. Bankruptcy was set up as a safety net for such people. Most people work hard to pay their bills. But, the inability to continue to pay directly results from a life-changing situations, such as divorce or job loss combined with the severe economic recession that has affected the world. In many ways, bankruptcy filers are responsible and conscientious because they seek to confront their financial problems rather than running away and avoiding creditors.
Myth #4: Your Spouse Must Also File for Bankruptcy
A bankruptcy filing by one spouse does not affect the other and does not require the other spouse to file. If one spouse has a significant amount of debt in his/her name, that spouse can file without the other spouse. However, if spouses have significant debts for which they are both liable for and they want discharges, it makes sense for both spouses to file together. Otherwise, if only one spouse files bankruptcy on joint debt obligations, the creditors will simply demand payment for the entire amount from nonfiling spouse.
Myth #5: Only U.S. Citizens Can File for Bankruptcy
If you own substantial property in the United States, you can file for bankruptcy in the United States. You do not need a United States citizenship. To learn more about these and other myths about bankruptcy and how to decide whether or not bankruptcy makes sense for you, read The Road Out of Debt: Bankruptcy and Other Solutions to Your Financial Problems or visit www.roadoutofdebt.com
Theodore Connolly is a personal finance expert, lawyer with the Boston office of the law firm Edwards Angell Palmer & Dodge LLP. He co-wrote the Road Out of Debt with Joan Feeney, bankruptcy judge for the District of Massachusetts. The Road Out of Debt is a financial defense manual that helps the reader fight back against debt problems with easy-to-understand, practical advice. He graduated from Duke University and Boston College Law School. He has appeared on national television and has written for or been used as an expert for many national print and web articles.