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 thatExperian uncovered.
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.
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.
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."
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 keep it."
Myth 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.
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.
"There 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."
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