The 5 Greatest Myths About Bankruptcy in 2010 by Marc Tow

In this economic climate many more taxpayers, couples, families and businesses are turning to bankruptcy than ever before. When the paychecks have decreased, money has been pulled from every account and bills are piling up, a fresh start can be the perfect solution. What stops most taxpayers is a sense of pride and some facts that they think they know about bankruptcy, but are those things really true? As a bankruptcy attorney for over 30 years, I feel the need to clear the air on these most:

1. I will lose everything.

This is the number one mistake that I hear clients make about bankruptcy. Every state has bankruptcy laws that protect certain types of assets such as your house, car (up to a certain limit), retirement accounts, household good and even jewelry!

2. When I file bankruptcy everyone will find out—even my neighbors!

This is another major misconception when filing a bankruptcy. Unless you're a movie star 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. In most cases only the people you choose to tell will ever know.

3. Only losers and crooks file for bankruptcy.

This cannot be further from the truth. The clients I see on a daily bases are regular Americans who have lost control of their finances. Maybe they have lost their job, become underemployed, gone through a divorce or their company has failed. It is extremely hard to predict a recession the size of the one that we are going through now which is why most consumers were not properly prepared. There is nothing to be ashamed of in this; that is why America created bankruptcy laws in the first place: for honest citizens who run into hard times and need a second chance.

4. Filing for a bankruptcy will ruin my credit.

While filing a bankruptcy will negatively affect your credit in the immediate future it can actually help it in the long run. Many people struggle for years and years, not making their payments on time. This shows a long-term inability to pay creditors, which severely affects a person’s credit score. If a person who has always had good credit history files bankruptcy as soon as they lose control of their finances, then their credit starts to repair right away.

rn5. 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.

So overall, bankruptcy really isn’t as scary as it seems. Average, working-class Americans file every day. And in this economy, it might be a good option for a lot of families.rnPLEASE SEND ME YOUR QUESTION OR COMMENTS AT TOWLAWBANKRUPTCY@GMAIL.COM AND PASS THIS ALONG TO YOUR FRIENDS!

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Best Regards,
rnMarc TowrnBankruptcy, Real Estate and Securities attorney for more then 30 years. rnReal Estate Broker for more then 10 years. rnFinance expert.rnLocated in Orange County, Newport Beach, California.