The Bankruptcy Code can be confusing and often leads to misconceptions. We hear them every day and want you to understand the truth — so take a look at some of the most common myths about bankruptcy and then get the facts.

Myth 1 – Bankruptcy is only for people looking for a last resort.

Bankruptcy is for people overwhelmed by debt related to credit cards, medical bills, an unreasonable mortgage, or a number of other reasons. It’s a way to get a fresh start when you’re struggling.

Myth 2 – People will know that you filed for bankruptcy.

We often hear from clients worried that their family members or friends will find out they’ve declared bankruptcy. While corporate bankruptcies ARE listed in newspapers, personal bankruptcies are not because debtor privacy in Pennsylvania bankruptcy cases is protected. Only a credit check will reveal your bankruptcy; it’s your decision whether to tell anyone else about it.

Myth 3 – You can’t discharge secured debt such as a car loan or mortgage through bankruptcy.

You CAN discharge secured debt such as a mortgage or car loan in bankruptcy. Usually, this is an option for people who absolutely can’t keep up with the payments or want to let go of property that is now worth less than the loan.

In Chapter 13 bankruptcy, you can also negotiate down the amount of your car loan or strip a second or third mortgage.

Myth 4 – Personal loans are not dischargeable.

Many people believe when they take out a personal loan for school that it will be treated like a student loan, which is usually not dischargeable. But nearly all personal loans CAN be discharged through bankruptcy.

Myth 5 – Bankruptcy preparers and debt consolidators are better options than bankruptcy.

Many people see TV ads talking about avoiding bankruptcy and legal fees by hiring a debt consolidation company or non-attorney bankruptcy preparation service. They can make these options sound attractive and less expensive. But what they don’t tell you is that these services offer you much less legal protection and no advice related to your unique financial situation — and they often end up costing you much more in the long run. Companies like this expose you to greater risks, significant tax consequences, and no legal recourse for shoddy or careless work that may leave you owing thousands of dollars.

Myth 6 – Your creditors will get your assets in bankruptcy.

In most cases, almost all property can be protected by state and federal exemptions in bankruptcy. Our experienced attorneys can help you avoid the possibility of losing personal property using their extensive knowledge of the Bankruptcy Code.

Myth 7 – Bankruptcy ruins your credit forever.

The largest aspect of your credit score is your debt-to-income ratio. Because filing for bankruptcy helps you significantly lower your debt, it usually will IMPROVE your credit score over time. Most people with an uncomplicated bankruptcy filing will see their credit scores hit somewhere in the 680 to 720 range just two years after filing.