Myths and Misunderstandings About Bankruptcy

Summary:   Most of the common myths about bankruptcy are wrong. For most people in trouble with debt, bankruptcy is the quickest way to become debt free and credit worthy. Your family will likely benefit the most.

Common Myths and Misunderstandings Regarding Colorado Bankruptcy

1. Others will Know That I Filed

The truth is, in most cases only your lenders and other creditors will know.   Although a Colorado filing is a matter of public record at the federal courthouse and it will appear on your credit report, there is generally no other public record made.   Most people will find out only if you tell them.

2. You Will Lose Everything You Have

Usually you will be able to keep all of your assets, because of the fairly generous Colorado exemptions.

In most cases, any property that you may lose is property which has a lien on it which you don’t pay.

3. You Will Not Be Able to Own Anything Again

You can usually regain the ability to purchase on credit quicker if you wipe out your debts and get a fresh start much sooner than if you continue to go along month after month just barely getting by, paying your high interest rate debts for years into the future.

Usually you can purchase another car on credit within a year or so and a house with the lowest prime interest rate within 2 years.

4. You Will Not Get Credit Again

Just the opposite. You will likely get good credit much faster if you eliminate your debt and get back on track. Compared to floundering for months and years under the weight of high bills and 34% credit card interest rates.

5. My Employer Will Use it Against Me

Federal law prohibits the discrimination against you by your employer. In many cases, your employer will not know anyway.

6. If I File, it Means I am a Bad Person and my Family Relations Might Suffer

Not true. You can better serve your family by freeing up your income to support your family. Presently in 2007, more than 3,000 foreclosures are started each month in the metro Denver area. Many bankruptcy filings are done in order to save the home. Saving your home and freeing up income to better support your family is a more admirable course of action than continuing to flounder for years under the burden of 34% interest rates on credit cards, court judgments, and high mortgage loan balances.

7. Bankruptcy Will Not Help Me with My Taxes

Not true. For many people, not filing bankruptcy is a huge income tax mistake, because the forgiveness of debt by your mortgage lender, car loan lender, and credit card company will result in taxable income for the amount of the forgiveness of debt.   Unless it happens in bankruptcy.

Also, some earlier IRS and Colorado income taxes are dischargeable in bankruptcy.