1. Believing that you can max out all your credit cardsand get away with it by filing bankruptcy, effectively never having to pay back the money again. This will, in all probability be classified as fraud during the judicial process and even the trustee will scrutinize all your purchases right before filing. Obviously, there are legal repercussions to this since fraud is a criminal offence.
2. Filing for bankruptcy will wipe your credit score cleanbecause you will have no more outstanding debt. The fact is that filing bankruptcy is one of the worst things that can possibly happen to your credit score. Unlike other negative that stay on your report for 7 years, bankruptcy stays for 10.
3. Your reputation will be tarnished because everyone will find outthat you have filed for bankruptcy. This is only partially correct. If you’re running a well known business then you will probably get some kind of press coverage for the interest of the people. But as far as individuals are concerned, the sheer number of people filing bankruptcy makes it unfeasible and improbable to cover it.
4. If I file chapter 7, all my debts will be wiped off.It’s not so easy. If it was, the process of bankruptcy would turn into a “spend all you can and forget it” scam. Alimony, student loans and debts incurred as result of fraud are some of the debts that cannot be erased and will not be covered under bankruptcy.
5. Thinking that you will never be able to get credit again.Getting credit will not be a problem, in fact you will start getting credit offers from companies only come time after you have filed. The trouble however, will be in finding a good interest rate because all the companies will now offer a loan at a much higher rate. Therefore, if you need to buy a house or a car, you might want to do that before you file.
6. Only incompetent people and frauds file for bankruptcy.You could not be more wrong. Common people are forced by circumstances (like a job loss, divorce or serious illness) to a point where it just becomes impossible to meet day-to-day expenses and pay bills. There’s no shame in it and it happens to the best of us.
7. You think that filing for bankruptcy is a cumbersome and tedious process.Actually it’s a pretty simple and straightforward process. Although it is not recommended, but just to emphasize how simple it is, you can even file a bankruptcy without requiring the consultation services of an attorney.
8. It is not possible to file for bankruptcy twice.That’s not true at all; it is possible to file for chapter 7 bankruptcy once in every eight years. If you’re filing under chapter 13, it is possible to file more often that that but you cannot have more than one case open at the same time.
9. Taxes have nothing to do with filing bankruptcy.Alright, this one does apply in most of the cases. But there is such a thing as tax bankruptcy, also known as Tax Mama. To apply for this, you have to file all your returns and the taxes owed need to be at least three years old.
10. Both partners have to file for bankruptcy if you happen to be married.There is no compulsion to do such a thing. It is quite common for one spouse to have a significant amount of debt in their name only. Only if both spouses have debts that they want to discharge and are both liable for it, then they should file together. Otherwise the creditor is liable to ask payment for the entire amount from the spouse who did not file.