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Bankruptcy Myths

April 22, 2020

At Georgia Family Law, P.C., our lawyers are dedicated to helping clients thoroughly understand the bankruptcy process, their legal rights, and their options in restructuring or discharging their debt. When you meet with an attorney at our firm, we will take the time to answer your questions, review your particular situation and address your concerns in order to help you make the right decision for your financial future.

There are a number of myths about bankruptcy, and we have identified several of these on this page. Please take a look at this list and then contact an Attorney at Georgia Family Law, P.C. who can guide you through the process and help you protect your family:

Bankruptcy Myths and Related Facts

  • Unemployment

  • Retirement

  • Residence

  • Vehicle

  • Debt

  • Future Credit

  • Single Bankruptcy v. Joint Bankruptcy

  • Privacy

  • Miscellaneous


Myth: Filing Bankruptcy can cost you your job

Fact: Federal law prohibits employers from firing an employee in MOST cases, however, an employer decides not to hire you based on a Background check (Finding Bankruptcy). The Supreme Court ruled on this in the case of Myers v. TooJay's Management Corp., No. 10-10774 (11th Cir. May 17, 2011). To ensure that your rights are protected, please discuss this with an Attorney from Georgia Family Law, P.C. who can advise you on all of the specifics of this law.


Myth: I will lose my 401(k) or Retirement Plan if I file for Bankruptcy!

Fact: In almost all cases due to The Employee Retirement Income Security Act of 1974, or ERISA, plans have been determined to be protected or exempted

Myth: I should borrow against my 401k to pay off credit cards or medical debt!

Fact: No way, as mentioned above, most 401K's are protected and if you take money out of your 401K to pay debts that may be distinguished in a Bankruptcy, you may lose the money from your 401K which could have been saved had you worked with an Attorney from Georgia Family Law, P.C.


Myth: I will lose my house if I file for Bankruptcy!

Fact: It depends. Many people will be able to keep their house in Bankruptcy if their payments are up to date. An Attorney with Georgia Family Law, P.C. can negotiate with the Lender to not only let you keep your house, but possibly lower the Interest Rate as well. Additionally, if you have a second mortgage on your house, the Attorneys at Georgia Family Law, P.C. may be able to work to get the second Mortgage dismissed.

Myth: I will never be able to buy a house!

Fact: You will not qualify for a new home loan immediately after being discharged from Chapter 7 bankruptcy, but most clients have qualified in approximately one to two years after discharge.

Myth: I will never be able to refinance or sell my house while in Chapter 13 bankruptcy!

Fact: When refinancing, the decision about whether you can obtain credit is up to the company refinancing your mortgage. Most companies are willing to consider refinancing after 12 months of continuous, on-time monthly payments to your mortgage company and Chapter 13 bankruptcy Trustee.

Myth: I must receive permission from my Mortgage Company before I can file for Bankruptcy!

Fact: Not only do you not need permission from the Mortgage company to file Bankruptcy, but the Bankruptcy will create an automatic stay which stops the foreclosure of your home.

Myth: My Home Owner Association (HOA) can "get me" for dues and fees after I file bankruptcy!

Fact: The bankruptcy law was amended in 2005 to provide that HOA dues and fees accruing AFTER the date of a bankruptcy filing are still due and collectible from a debtor. The HOA dues and fees accrued before the Bankruptcy filing will become part of the Bankruptcy. This is an important distinction as if you intend to let your house go into Foreclosure, you need to ensure to consult with an attorney from Georgia Family Law, P.C. to ensure that you are protected from HOA fees and dues that occur after the Bankruptcy, but prior to a Foreclosure.


Myth: I will lose my Car or Truck if I file for Bankruptcy!

Fact: It depends. Many people will be able to keep their car or truck in a Bankruptcy if their payments are up to date. An Attorney with Georgia Family Law, P.C. can negotiate with the Lender to not only let you keep your car or truck, but possibly lower the Interest Rate as well.

Myth: My Car, House, and Boat can be kept without having to pay off the loans when included in the bankruptcy file!

Fact: NO, you can’t keep them without paying, but you can still keep them in Bankruptcy if you do pay under a Reaffirmation Agreement which will be negotiated by Georgia Family Law, P.C. and the Lender.


Myth: All debts can be discharged in Bankruptcy filing!

Fact: Not all debts can be discharged in Bankruptcy. Debts like, Child Support cannot be discharged in Bankruptcy. Debts like Student Loans and Taxes are almost never discharged but there are situations where Georgia Family Law, P.C.s can negotiate to have all or part of Student Loans and Taxes are discharged.

Myth: When on spouse files Bankruptcy it will not affect the other’s credit!

Fact: The other spouse's credit should not be affected unless there are joint accounts. Georgia Family Law, P.C. can discuss the alternatives of Bankruptcy as a single filer or joint to determine what is the best interest of both parties.

Myth: The Credit Card Companies still charge Interest during the Bankruptcy Process during a Chapter 13 Bankruptcy!

Fact: In your Chapter 13 bankruptcy plan, the credit card companies and all other unsecured creditors are barred from collecting interest. If you owe $10,000 in credit card debt and have an interest rate of 25 percent, you can save $2,500 per year in just credit card interest alone.

Myth: A consumer can choose whether to include all debt in a Bankruptcy filing!

Fact: No, a consumer must list all of their income, assets, and debts in their Bankruptcy filing, however, they can agree to repay some of their debts through a Reaffirmation Agreement which Georgia Family Law, P.C. will negotiate with the Creditor so that those debts will be repaid and if they are secured debts, that property will be retained by the debtor.

Future Credit

Myth: My credit will be ruined for the rest of my life if I file bankruptcy!

Fact: You should first consider the difference between your credit score and your ability to obtain credit. Your credit score is the number the credit reporting agencies assign to your credit. It is based on your history of making payments on your debts. Your ability to obtain credit is based on your ability to make payments in the future and look at your income and your debts. If your debts exceed your ability to make payments, you may be unable to obtain credit even if you have consistently paid your debts on a timely basis. In other words, you may have a good credit score and not be able to purchase a car because you have too many debts. Filing bankruptcy will eliminate many of your debts and will improve your ability to obtain credit in the future.

Myth: I will not be able to obtain credit for 10 years after bankruptcy

Fact: Believe it or not, you may be able to obtain a car loan or a credit card almost immediately after being discharged from your bankruptcy. Since you have eliminated most of your debts in bankruptcy, many finance companies believe you now have the ability to make timely payments on a vehicle or credit card.

Single Bankruptcy v. Joint Bankruptcy

Myth: If married, my spouse and I must both file bankruptcy!

Fact: It is not necessary that both you and your spouse file bankruptcy to save a home or car that is financed in both names. When one spouse files bankruptcy on a joint debt, an automatic stay goes in place that keeps your creditors from foreclosing on your home or repossessing a car.

Myth: Consumers can file for Bankruptcy as many times as they like!

Fact: Consumers can file more than one Bankruptcy in their lifetime, but there are limits depending on what type of Bankruptcy that you previously filed, how long ago and what type of Bankruptcy are you filing for now.


Myth: Everyone will know that I filed for bankruptcy, and my reputation will be ruined!

Fact: Unless you are a celebrity or well-known persona and the media discovers you have filed, it is highly doubtful that anyone except your creditors will know that you have filed for bankruptcy. Bankruptcy is a public proceeding, but there are countless cases at any given time and it is extremely rare that a case will be picked up and made public.


Myth: Only irresponsible, lazy people file for bankruptcy!

Fact: This is simply just not the case. Good, honest, and hard-working people often find themselves in situations where they need to file for bankruptcy. A divorce, unforeseen medical condition, or lost job can lead to overwhelming debt and then bankruptcy. Just because you are considering bankruptcy does not mean that you are a bad person.