I must be dead broke
before I file for bankruptcy.
This
is completely false and unwise!!!! It is better to consult with a bankruptcy
attorney to learn how to protect your income and your assets before you are completely penniless. A fresh start doesn’t mean dead broke.
MYTH
#2:Bankruptcy ruins your credit.
Financial
trouble ruins credit.If your credit has not already taken a beating, then it
will once the assets run out that have kept you going. Bankruptcy stays on your credit history for 10 years, negative
credit stays there for 7! At least with Bankruptcy you eliminate debt and have a chance to start over, start saving.Depending on the circumstances, scores can actually increase 100-200points after filing.
If you now for example earn $40K/yr and have accumulated credit card debts of $60K your debt to income ratio (DTI) is hurting
your credit score. After bankruptcy discharge, your income may stay the same but not your debt. Also, you are actually
a better credit risk post Bankruptcy than you are before you file.
MYTH #3:
If I file for bankruptcy
I will lose my home.
Not necessarily
and in most cases, not at all. The goal of bankruptcy is to protect you and your assets. If you are behind
in mortgage payments and need time to catch up, Chapter 13 offers you the chance to reorganize your debts and catch up on
the arrears (the amount you are behind in payments) over a period of 3-5 years. Once in bankruptcy, the lenders have no choice
but to cooperate so long as you meet the qualifications and maintain the planned payment arrangement.
MYTH
#4:
You should max-out all of your credit cards before you file for bankruptcy.
If you
purposely maxed out your credit cards intending to declare bankruptcy, you might have committed fraud. Consult a bankruptcy
attorney as soon as your debt goes out of control. If you know you can't repay or decided to declare bankruptcy,
you need to stop using your credit cards.
MYTH #5:
You should deplete your retirement funds (ie the 401K or IRA) before declaring bankruptcy.
ABSOLUTELY NOT!!!! Your retirement funds are protected from the grips of your creditors – so be prudent with them.These funds are considered untouchable and should be kept for their intended purpose - YOUR RETIREMENT
- not handed over to your creditors!
