Bankruptcy Mythbusters what is Consumer Bankruptcy?

The “You Don’t Have to Pay back Debts” myth

• A discharge only gets you out of some debts—such as credit card debt.
• The law defines certain debts as non-dischargeable, such as debt procured by fraud, support obligations, certain tax obligations, student loans, drunk driving civil judgments. Of course, there are exceptions. You should consult with a bankruptcy attorney about your specific debt.
• The law also prevents certain “bad debtors” from obtaining a discharge of any debts if the debtor falsified documents in filing or committed other frauds in filing.

“Choosing what debts and what assets are in bankruptcy” Myth

• So many debtors come to court and tell the Judge that a certain debt or asset was “not supposed to be part of the bankruptcy”---usually debts they like, such as mortgages on a vacation home or a car loan.
• Debtors should know that ALL pre-petition debts and ALL assets are potentially affected by a bankruptcy filing.

The “Spend A lot before filing” myth

• Unfortunately, Congress is ahead of you on that one.
• Under the bankruptcy code, debt for “luxury goods or services” over a statutory amount within 90 days of filing are presumed to be nondischargeable.

The “Bankruptcy fixes your debt problems” Myth

• Bankruptcy is sometimes referred to as a “fresh start,” which is true as well as misleading.
• Bankruptcy gets rid of debt you currently have but it cannot help you plan for the future.
• You have to develop and stick to a sustainable budget and make sure that you do not spend more than you make so that you do not wind up back in financial distress.