Over the years there have been many myths and rumors of what happens to people who file bankruptcy. Many people believe if they file bankruptcy they will lose everything they own. This is far from the truth, in fact it would be impossible to get the fresh start that bankruptcy promises if a big truck pulled up and took away all of one's belongings to be sold at auction. Congress enacted bankruptcy exemption laws that protect a fair amount of property from being taken by the bankruptcy estate. In today's economy, rarely does anyone lose anything. The bankruptcy trustee has to weigh the costs of collecting the property and selling it. With the value of everything being down, unless it's an extremely valuable item it is usually not worth taking the time to sell it. I reiterate, the last thing the bankruptcy trustee wants to do is to come over to someone's house, load up their belongings and take them to a local swap meet to sell. It costs more time and money to collect it and sell it than what is recovered.
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The other myth about a bankruptcy filing is that someone's credit will be destroyed and they will never be able to get credit again. This is something that was obviously created by the credit industry. First of all, at the point in time when someone needs to file bankruptcy, their credit score can't go much lower. When an individual in this situation exercises their right to file bankruptcy, their score can only go one way and that is up. Shortly after the bankruptcy discharge, many people find themselves getting offers of credit in the mail. At this time it's important for the individual to be careful and not get themselves into the same trouble that caused them to file bankruptcy in the past. People need to understand that creditors are opportunists and know people exiting bankruptcy are debt-free or close to it. As long as they can stay employed creditors see them as an opportunity to make money.
Personally, I believe that most rumors that circled the Internet are put there by creditors. I have personally heard individuals prior to filing bankruptcy talk of creditors threatening them with jail time if they didn't make a payment. It is true that many creditors have become more aggressive these days. Usually, it's the debt buyers that buy the debt from the original creditor that have no scruples in their debt collection tactics. They know if they can keep the debtors scared enough to continue making payments, since they bought the debt for pennies on the dollar, it's all profit from there. It's interesting that it's common for a bankruptcy attorney to tell stories of how their clients only wished they had filed earlier. Making the decision to file bankruptcy is a tough one, but people need to take the emotion and their ego out of it and make a rational decision with the help of a bankruptcy attorney.
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