If you think
you know all you need to know about the new bankruptcy law, you might want to
think again. There's a lot of misinformation out there, and much of what you think
you know might not be true.
A recent consumer survey conducted by the American
Bankers Association showed that more than half of those surveyed were aware that
Congress had recently passed a new law, but that doesn't mean those consumers
knew what was actually in the legislation.
And bankruptcy folklore continues to emerge. So much
so that Experian, a credit reporting agency, has joined with bankruptcy
attorneys to correct the top 10 myths that Experian
Myth No. 1: Consumers can
file for bankruptcy as many times as they like.
Some strict limitations have been set by the new law. Debtors will
not be able to file Chapter 7 bankruptcy if they've been through
a Chapter 7 within eight years of the new filing. If they want to
file for Chapter 13, they will not receive a discharge within two
years of a previous Chapter 13 discharge and within four years if
they were discharged from a Chapter 7, 11 or 12 bankruptcy.
Myth No. 2: Filing for bankruptcy
will give a consumer a new start with credit.
Not necessarily. "Bankruptcy is a negative mark on the credit
report that will impact a credit score on a consumer's credit profile,"
says Samah Haggag, manager of analytics for Experian.
This mark can lead to higher interest rates, the inability
to rent an apartment and difficulty getting a job. Haggag advises
consumers to consider all options like debt consolidation and credit
counseling before attempting to file for bankruptcy.
Myth No. 3: The car, house
and boat can be kept without having to pay off the loans when included
in the bankruptcy file.
You can't keep them without paying the loan," says Jay Westbrook,
bankruptcy scholar and professor of the University of Texas Law
School at Austin, "assuming that when you bought the car, for
instance, you gave the lien on the car for the purchase price."
He adds that if the vehicle is repossessed and you
file before the car or boat is sold you can get it back.
"In order to do that you have to make sure there's
insurance, and you have to agree to pay off the loan in order to
No. 4: All debts can be discharged in a bankruptcy filing.
Bankruptcy experts say certain debts such as child support, student
loans and most taxes are not discharged.
Myth No. 5: When one spouse
files bankruptcy it will not affect the other's credit. It
will if they have one or more joint accounts.
are laws against causing the bad credit of one spouse to be automatically attributed
to the other," says Westbrook. "But, as a practical matter, filing could
have a negative effect on the other spouse. It shows up as a bankrupt account."