Arizona Bankruptcy Attorney-Bankruptcy Misconceptions

People traditionally talk about bankruptcy without ever consulting with a qualified Arizona Bankruptcy Attorney. Consequently, there are many myths and misconceptions the general public has about bankruptcy. I will attempt to clarify 11 such myths or misconceptions here.

1. All debts are cleared in a Chapter 7 bankruptcy. Certain types of debts cannot be discharged, or erased. They include child support and alimony, student loans, and debts incurred as the result of fraud.
2. I will lose everything. This is a misconception that keeps people who should file for bankruptcy from doing it. While the bankruptcy laws vary from state to state, every state has exemptions that protect certain kinds of assets, such as your house, your car (up to a certain value), and money in qualified retirement plans, household goods and clothing.
3. I'll never have credit again.  This is not true. It won’t be long before you begin to receive credit card offers again. They'll just be from lenders that will charge very high interest rates. However, this is a process you will have to go through in order to obtain a high credit score. We don't advise our clients to run up a lot of bills, but if you need to get an automobile you will be able to get credit. Also, if you have a credit card with a zero balance on the day you file for bankruptcy, you don't have to list it as a creditor since you don't owe any money on it. That means you might be able to keep that card even after the bankruptcy.
4. If you're married, both spouses have to file for bankruptcy. Not necessarily. If the debt is solely in the other spouses name then they can file a single bankruptcy. However, you will have to list the liabilities of the spouse not filing to relieve them of any liability. However, if spouses have debts they want to discharge that they are both liable for, they should file for bankruptcy together. Otherwise, the creditor will simply demand payment for the entire amount from the spouse who did not file.
5. It's very difficult to file for bankruptcy. It is not difficult. But it is recommended that you hire a lawyer to make sure that all the forms and documents are filled out and filed correctly.
6. Only "deadbeats" file for bankruptcy. Don’t be too proud to file for bankruptcy. It is more common than you think. Donald Trump, one of the world’s wealthiest individuals filed for bankruptcy in his earlier years. Most people file for bankruptcy after a life-changing experience, such as a loss of job, a serious illness, or a divorce. They've struggled to pay their bills for months and just keep falling further behind. If you have to file bankruptcy because you abused your credit then simply use this as a life lesson and don’t repeat the same mistake.
7. I should not include certain creditors in my filing because it's important to me to pay them back someday and if the debt is discharged, I can't ever repay them. It's a commendable sentiment. After a bankruptcy, you are no longer obligated to repay them, but you would always have that opportunity. If your conscience bothers you because you didn't pay your debts, there's nothing in the bankruptcy code that prevents you from doing that once you get back on your feet. However, bankruptcy is an all-or-nothing deal, so you must include all your creditors in the petition.
8. You can't get rid of back taxes through bankruptcy. Generally speaking, this is true. However, there are exceptions. To have a chance of success, you have to file all your returns and the taxes owed need to be at least three years old.
9. You can only file for bankruptcy once. The truth is you can only file for Chapter 7 bankruptcy once every eight years. For Chapter 13 reorganization, you can file more often than that, but you cannot have more than one case going at one time. Still, it's not very good to make filing bankruptcy a habit as you will never be able to retain a good standing with credit agencies.
10. I can max out all my credit cards, file for bankruptcy, and never pay for the things I bought. This is not a good idea. It's called fraud and bankruptcy judges tend to frown upon it. The trustee in your case will review all your purchases right before your filing. And the trustee knows what to look for to find fraud. Don’t commit a criminal act. The consequences are far more severe than a simple bankruptcy.
11. Everyone will know I've filed for bankruptcy. Unless you're famous or a prominent person and the filing is picked up by the media, probably the only people who will know about a filing are your creditors and anyone you decide to tell. While it's true that bankruptcy is a public legal proceeding, there are so many people who file for bankruptcy that publications do not have the space nor inclination to publish all of them.