Dorothy's Top 10 Bankruptcy Myths:

Myth 1: "If you want to keep your car or your house, 'leave the debt out.'"
Bankruptcy law requires you to reveal everything. You must list all your belongings and all your debts. You sign your Bankruptcy paperwork under oath, which is the same as testifying in Court. When you leave out debts, you have broken the law, lied to your attorney, and deprived yourself of the "loophole" allowing you to keep your car and your house. As long as you keep your car and house payments current, you get to claim them as an "exemption." If you don't list your car loan or mortgage, you have to explain why you make car and mortgage payments. The law requires you to list all your debts, even ones you want to pay.

Myth 2: "You can't get rid of taxes in Bankruptcy."
Sometimes you can, sometimes you can't. If you always filed your taxes on time, any taxes you have owed for more than 3 years could be wiped out in Bankruptcy. Other taxes can be paid off through a Chapter 13.

Myth 3: "Bankruptcy gets rid of all debts."
Although most types of debts can be wiped out in Bankruptcy, the process does not eliminate debts for child support, alimony, student loans, criminal restitution, and some kinds of taxes. Debts that were run up just before the Bankruptcy was filed or when you had little likelihood of every repaying the debt also cannot be eliminated through Bankruptcy. In addition, if property is financed with credit, you must pay the debt or you will lose the property. Some people believe that they can file Bankruptcy and keep their home and car without ever paying for it, but this is a fantasy!

Myth 4: "If I list a payday loan in a Bankruptcy, I might go to jail."
It is a crime to write a check you know is no good. If you bounce a check, the District Attorney can prosecute you. But they will always contact you first to try and work out payment arrangements. With "payday loan companies" the prosecutor has a policy that the creditor knew the check was not good when it was written, and there is no crime. As part of their business operation, the loan company took the risk you would make your check good later. Payday loans are collected by suing you and then garnishing your paycheck, not through criminal court.

Myth 5: "You can only file Bankruptcy every seven years."
Everyone believes this, but the truth is, if your last Bankruptcy case was not completed, you can file again in 180 days (or less in some instances). If you completed your Bankruptcy and received a Discharge (a Court Order eliminating debts through Bankruptcy), you must wait eight years (not seven, as most people believe) from the date you filed your first case to file again. But you are still entitled to file a Chapter 13, and in a Chapter 13, you can receive many of the same benefits as you would with a Chapter 7.

However, if you were denied a Discharge in Bankruptcy because you lied or refused to obey a Court Order, you cannot wipe out any of the debts from your earlier Bankruptcy case.

Myth 6: "Bankruptcy stays on your credit for seven years."
Under the current law, Bankruptcy remains on your credit history for a full 10 years.

Myth 7: "Filing Bankruptcy is for the dishonest or poor person who will never amount to anything."
Bankruptcy is one of the rights provided in the United States Constitution. Although most people want to pay their debts, Bankruptcy provides a way for those who do not have the ability to pay their debts to have a fresh start. The roots of Bankruptcy can be traced to the Old Testament of the Bible, which says - At the end of every seven years thou shalt make a release. And this is the manner of the release: every creditor shall release that which he has lent unto his neighbor and his brother; because the Lord’s release hath been proclaimed.” (Deut. 15:1-2)

Throughout history, many famous people have had to file Bankruptcy or deal with overwhelming debt problems, including Wolfgang Amadeus Mozart and President Thomas Jefferson. Recently, celebrities who have filed Bankruptcy include musician Elton John, actress Kim Basinger, Sherman Hemsley from "The Jeffersons,” Gary Coleman from the "Different Strokes," former teen idols Cory Haim and Cory Feldman, Rapper MC Hammer, actor Burt Reynolds of “Smokey and the Bandit,” Las Vegas entertainers Wayne Newton, Jerry Lewis, Mickey Rooney, and even former Treasury Secretary John Connally, whose signature still appears on our currency.

Bankruptcy laws specifically prohibit someone who has been dishonest from getting out from paying their debts. Surprisingly, poor people are usually unable to get help through Bankruptcy, as they lack the good credit to get into sufficient financial trouble to qualify for the benefits of Bankruptcy.

Myth 8: "You'll never be able to get credit."
Credit problems due to Bankruptcy are exaggerated. Not paying your bills on time and having too much debt are the biggest reasons for bad credit. Once the bills are gone, your credit score can improve because you can finally begin pay your bills on time. Naturally, there is a downside to filing Bankruptcy. Following a Bankruptcy, you can expect to pay a higher interest rate on credit purchases and may be required to put "down" a larger amount on some purchases. Although the economy is constantly changing, it has been possible to refinance or buy a home in as little as two years after filing Bankruptcy if you follow the instructions in the credit rebuilding kit. Of course, if you do not start to pay your bills on time once your Bankruptcy is over, "kiss your credit goodbye." Our office is proud to provide you with a FREE credit repair and rebuilding kit once your Bankruptcy has been completed to help you regain your good name. We don’t know of any other Nevada law firm that provides this valuable assistance to their Bankruptcy clients.

Myth 9: "If a debt is not listed in a Bankruptcy, it is not discharged."
This myth could be true in some instances, but it is usually false. In most consumer Bankruptcy cases, the Trustee does not collect any money to be paid out to the creditors, so it doesn't make any difference whether a creditor is listed or not, because no creditor gets paid. Nevertheless, the law still requires you try your best to list every one of your creditors.

Myth 10: "If I go with Chapter 13, I will have to pay all my debts."
This is true in some areas of the U.S., but it is not true in Nevada. Here, our Judges require you to pay only what you can afford. Depending on your income level, you might have to pay for three years, or if your income is higher, you must pay for five years. Usually, your payments go towards your delinquent mortgage and vehicle payments, or to pay off back taxes. Most of the time, other creditors are paid little or nothing.