Facts About Bankruptcy

Produced by Massachusetts Law Reform Institute
Created December 2019

Facts about some common bankruptcy myths.

  1. When you file a bankruptcy you usually get to keep most of your property
    • If you file for bankruptcy you do not have to lose most of your property. If you file for chapter 7, your furniture, clothes, household goods, 1 car and your house are usually protected and you will not lose them just because you filed for BK.
  2. You will be able to buy things on credit even though you filed for bankruptcy
    • Many people get offered new credit cards soon after they file or even while they are in the middle of a BK case. But the offers come with a pretty high interest rate. And a few months after the case is over people can often get car loans.
    • Bankruptcy does not stop you from buying a house. But you will probably not get the best interest rate. If you work to build your credit after your bankruptcy, many people can get a mortgage as soon as two years after their case is over.
  3. You are not ruined even though the bankruptcy will be on your credit report for ten years
    • All bad credit is on your credit report for 7 years. BK is just on a little longer, for 10 years. But people can often still buy things on credit after a bk. One reason you can get credit after you BK is because you are usually debt free. So in that way, banks could think you are a good credit risk because you do not have a lot of other debt
  4. You must tell the court about all of your creditors
    • Sometimes when people file for BK they want to leave out certain creditors. This is a bad idea and against the law. You are not allowed to leave out a debt to your brother, your mortgage, or your auto lender in the bankruptcy. Listing all your creditor that does not mean that you are going to lose that property. You have to list every creditor let the court know about all your debts.
  5. Your spouse does not have to file for bankruptcy just because you do.
    • You can file for BK alone, even if you are married. If your spouse does not want to file and you do that is ok.
  6. Sometimes you can discharge your taxes in bankruptcy
    • In some limited circumstances you can wipe out your back income tax debts in bankruptcy. There are special rules so talk to a lawyer if you want to get rid of back taxes.

Filing without a lawyer

  • Bankruptcy is complicated. Filing without a lawyer is risky.
  • You can lose property and money. You can go to jail if you do not tell the truth.

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