The Law Office of Andrew Magdy
Saint Louis Bankruptcy

Bankruptcy Myths

Don't Myth Out On Your Clean Slate

Destroy the myths and start again with a clean slate. Call (314) 802-8328 today, and get your clean slate.

Bankruptcy Myths

The big 'B' is renowned for being a subject not-easily broached. Alongside religion, politics, and sex, financial matters are not normally considered 'polite' topics of conversation, and so we do not talk about them. This leads to the creation and build-up of many 'bankruptcy myths'. I would like to set the record straight, and also let you in on a little secret... lean in close now - bankruptcy is nothing you need to fear!

(Creditors may use scare tactics to frighten you off of filing for bankruptcy though. But think about it, they want you to keep paying them! There is a financial benefit for them, even if bankruptcy is right for you).

You should not be ashamed about filing for bankruptcy. I do not want to play down that it is a big deal, but you may be living in shame and fear right now, under constant harassment and threats. A bankruptcy would alleviate if not eradicate these financial issues holding you back. And so, to myth number 1:


1. Myth: Bankruptcy is a last resort, reserved only for those who have failed.

Reality: Bankruptcy is a Fresh Start, which helps good people out of bad situations. Why continue the hard grind when you can protect your possessions, protect your family, and provide yourself with a fresh financial start. Bankruptcy is not a reflection of your character, but rather an option available under the law for families to obtain debt relief. Indeed, almost everyone who files bankruptcy is honest, hardworking and good. They are there because even though they tried hard, the job market, or job loss, or the medical problem, or the unexpected expense, the divorce or the crazy interest rates, were just more than a person can handle. Andrew can help you keep your dignity, and make sure you do not feel badly because of your hardship.


2. Myth: If you cannot afford to pay your bills, you cannot afford to talk to an attorney.

Reality: Initial consultations are FREE. All you need to do is call (314) 802-8328 and set up a time to come in and talk to Andrew, and he will help you figure out a path forward based on what is right for you – with no obligation. If you decide that bankruptcy is the right path, we provide payment plans and flexible payment options to meet your distinct needs. What’s more, with a small retainer fee – subtracted from your balance – we can help protect you against creditor harassment. All you need to do is schedule a free consultation with our office, where we can speak to you one-on-one about your unique financial situation.


3. Myth: If you have been sued by a creditor it is already too late to file for bankruptcy.

Reality: Filing a bankruptcy will immediately STOP a lawsuit, foreclosure, sheriff sale, levy and/or garnishment. This is due to the Automatic Stay of the Bankruptcy Code, which is a very powerful provision that causes all creditors of a debtor to cease collection activities immediately, almost without exception.


4. Myth: You should cash in your 401K or retirement plan to pay off your debt before filing for bankruptcy.

Reality: Retirement funds are "exempt" (protected) in bankruptcy. You will not lose your retirement account if you file. If you decide to draw upon your retirement funds prematurely to pay creditors it could; (1) have serious income tax ramifications and (2) jeopardize your financial future. You should consult with an attorney before taking this drastic action.


5. Myth: You will never get a loan again after bankruptcy.

Reality: You will receive offers to finance vehicles and take out new loans immediately after the case is complete. We would however stress that you do not need to take the first offer that comes through the door, but rather remember what you have learned going through this process and go forward living within your means. Having said that, after your bankruptcy discharges you should have slightly more disposable income available to you with which you may responsibly borrow and finance, rebuilding your credit much more quickly than you might think.


6. Myth: Bankruptcy ruins your credit for seven years or longer.

Reality: Though bankruptcy may stay listed on your credit report for up to ten years, it becomes meaningless after a short time. Do not assume that just because your report lists you as having filed, that it will mean you will not be able to purchase a car, home, or other loan, or improve your credit. In fact, bankruptcy will actually improve your credit, as the slate is wiped clean and your debt to income ratio becomes much improved. Use new, small lines of credit wisely, and you will be amazed at how quickly your credit score recovers and rises. Do not fall for the lies of credit card companies or debt negotiators that try to sell you this myth in order to make more money out of you!


7. Myth: You can lose your job if your employer finds out you filed for bankruptcy.

Reality: Federal law (11 U.S. Code §525) prohibits any employer from discriminating against you because you filed bankruptcy. It is as simple as that. 


8. Myth: Creditors can continue to harass you after bankruptcy.

Reality: Even before your bankruptcy is filed, after you have paid your retainer fee (as little as $50 down with The Law Office of Andrew Magdy) and directed creditors to our contact details, creditors are not permitted to contact you directly. We have a national consumer protection partner to whom we can direct you if you continue to get harassed – click here for more information. As soon as your case is filed (which can be very quickly with Andrew – all we need are the fees, 6 months of your proof of income, and copies of the last two years of your federal and state tax return) all calls, mail, e-mail, lawsuits and general harassment must STOP. The Automatic Stay is immediate, and very powerful. Creditors will face serious sanctions if they continue to contact you.


9. Myth: Medical bills cannot be discharged in bankruptcy.

Reality: Medical bills, as well as credit card bills and personal loans, can and will be discharged in bankruptcy. It is only student loans that cannot be discharged. They can, however, be deferred.


10. Myth: I am worried that everyone will know that I have filed for bankruptcy.

Reality: Your case is not published in the local newspaper, or blasted out on any social media sites. It is listed only on the Public Access to Court Electronic Records  – which needs a subscription to view.


11. Myth: You will lose your possessions when you file for bankruptcy.

Reality: Most people who file bankruptcy do not lose their possessions, though you do need to consult your bankruptcy attorney to make certain. We offer free initial consultations at which you can go through this one-on-one with Andrew. Generally though, you will get to keep your vehicles, homes, and household goods, though you must remain current on your loans.


12. Myth: If one spouse files for bankruptcy, it will ruin the credit of the non-filing spouse.

Reality: An individual spouse can file bankruptcy without needing the other spouse to file jointly.  The filing spouses’ debt can be eliminated without affecting the non-filers credit, so long as the filing spouse holds his/her debt individually. Speak to an attorney before you make a decision as to whether you need to file jointly or individually. Andrew offers free initial consults. Go to our free evaluation by clicking here, or call (314) 802-8328 today.


13. Myth: I am not behind on my payments, so I do not need to file bankruptcy.

Reality: Even if you are paying the minimum amount, and have never been late, you might be looking at paying back an extortionate amount in interest over many months. Your creditors will get back much more than you owed them to begin with. Use this calculator to see how long it will take you to pay off your loans, and how much extra in interest you will end up paying on top of your loan. Simply enter your balance, interest rate, and monthly payment. Hit 'calculate' and it will give you the total amount of months you will be paying for. Then multiply the amount of months by the monthly payment. The difference between this figure and your initial loan is how much more you will be paying to the creditor, simply for the privilege of borrowing.

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