Misconception #1: YOU LOSE ALL YOUR BELONGINGS IN BANKRUPTCY.
Many of the bankruptcy cases that are filed by individuals are known as “no asset” cases. This means that the debtor or debtors preserve all of their belongings. The reason for this is bankruptcy gives you the privilege to keep a certain amount of property in which you can start over with. The belongings that you are able to keep are known as exempt property. Depending on the state you live in will determine what you can keep.
Misconception #2: BANKRUPTCY RUINS YOUR CREDIT FOR 7 TO 10 YEARS.
This misconception is unbelievable. There are many cases in which filing for bankruptcy will improve your credit. This is accurate for many debtors, because upon receiving their discharge, they are debt free. Often, their debt to income quota is zero. Once your bankruptcy is over, you can then begin the development of rebuilding your credit. If you are a proactive person, it is important to obtain new credit and to pay all of your necessities on time. If you are doing this for a constant two to three years you can reestablish good credit.
Misconception #3: YOU CANNOT DISCHARGE TAXES IN BANKRUPTCY.
Conflicting with the common misconception, typically income taxes can be freed in bankruptcy if you have the following information:
1. The taxes have to be a minimum of three years old
2. The associated return must of been filed a minimum of two years ago
3. Any added appraisal was more than 240 days ago.
4. There was no engaging in fraud or tax evasion from the taxpayer
There are many reasons in which these time periods have the possibility to be extended, do not count on these things alone to determine the discharge-ability of taxes depending on your situation.
Misconception #4: MEDICAL BILLS CANNOT BE DISCHARGED IN BANKRUPTCY.
Just like most bills, medical bills can also be discharged in bankruptcy. There are many suspicions in which individuals think otherwise. Wherever this misconception is coming from is false. In fact, one of the main three reasons that an individual will file for bankruptcy is medical bills, alone with job loss and divorce.
Misconception #5: YOU CAN PICK AND CHOOSE WHICH DEBTS TO LIST IN YOUR BANKRUPTCY.
False. It is mandatory for all debts to be filed, including debts owed to family and personal friends, business partners, and future debts that you may have. It is not possible for you to eliminate one credit card from the bankruptcy.