Bankruptcy myths
What people get wrong about bankruptcy
A lot of what people hear about bankruptcy is out of date or simply untrue, and it keeps people from getting help they could use. Here are the myths we hear most often in our Canton office.
Myth: I'll lose everything.
Fact: Ohio's exemptions protect a set amount of home equity, a vehicle, household goods, clothing and most retirement savings. Most people who file keep everything they own.
Myth: Bankruptcy wipes out every debt.
Fact: Some debts usually survive, including child support and alimony, most student loans, recent taxes, and debts from fraud. If you want to keep a house or car with a loan, you keep paying that loan.
Myth: I'll never get credit again.
Fact: Credit offers often arrive soon after a case ends, though usually at higher interest rates at first. A bankruptcy can stay on your report for seven to ten years, but many people rebuild their scores well before then.
Myth: If I'm married, we both have to file.
Fact: One spouse can file alone. But if you both owe a debt and only one of you files, the creditor can still collect the whole amount from the other spouse, so shared debts are a reason to file together.
Myth: Only people who don't pay their bills file bankruptcy.
Fact: Most people file after something they couldn't control: a job loss, a serious illness, a divorce or a business that didn't make it. Many have spent months trying to keep up before they call us.
Myth: I can leave off a creditor I want to keep paying.
Fact: You have to list everyone you owe. Nothing stops you from voluntarily paying someone back after your case, but every creditor has to be included in the filing.
Myth: You can only file bankruptcy once.
Fact: You can receive a Chapter 7 discharge once every eight years. Chapter 13 has different timing rules, so a later case is often still possible.
Myth: I can run up my credit cards and then file.
Fact: Charging luxury items or taking cash advances right before filing can be treated as fraud, and the trustee reviews recent spending. Once you're thinking about bankruptcy, stop using the cards.
Myth: Everyone will know I filed.
Fact: Bankruptcy is a public court record, but in practice the people who find out are usually your creditors. Newspapers don't print routine filings, and the court doesn't contact your employer.
Myth: Creditors can keep calling after I file.
Fact: Once your case is filed, the automatic stay requires most creditors to stop calling, writing and suing. If they keep it up, the law gives you remedies.
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