Misconceptions about Bankruptcy

Everyone will know I've filed for bankruptcy.

Unless you're a prominent person or a major corporation and the filing is picked up by the media, the chances are very good that the only people who will know about a filing are your creditors. While it's true that bankruptcy is a public legal proceeding, the numbers of people filing are so massive, very few publications have the space, the manpower or the inclination to run all of them.

All debts are wiped out in Chapter 7 bankruptcy.

You wish. Certain types of debts cannot be erased. They include child support and alimony, student loans and debts incurred as the result of fraud. If you've defrauded someone and a judgment has been made against you, that won't be erased either.

I'll lose everything I have.

This is the misconception that keeps people who really 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), money in qualified retirement plans, household goods and clothing.

I'll never get credit again.

Quite the contrary. It won't be long before you're getting credit card offers again. They'll just be from subprime lenders that will charge very high interest rates. However, if you're planning to buy a house or a car, you might want to do that before you file. Those loans will be tough to get, and the higher interest rate on such a large purchase would make a significant impact on your payments. 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.

Only deadbeats file for bankruptcy.

Most people file for bankruptcy after a life-changing experience, such as a divorce, the loss of a job or a serious illness. They've struggled to pay their bills for months and just keep falling further behind

It's really hard to file for bankruptcy.

It's really not. You don't even technically need an attorney. However, it's not recommended to go through the procedure without one.

I can max out all my credit cards...

...file for bankruptcy, and never pay for the things I bought. That's called fraud, and bankruptcy judges can get really cranky about it. The trustee in your case will review all your purchases right before your filing. He knows what to look for.