Common Myths about Filing for Bankruptcy in Oregon and Washington
Below are a number of common myths about bankruptcy and explanations of the truth.
Bankruptcy is Morally Wrong.
False. Bankruptcy is a legal right under the United States Constitution. Art. I, Sec. 8. While bankruptcy is typically the last option, there is nothing morally wrong about bankruptcy. Individuals and corporations, rich and poor, are entitled to seek protection under the bankruptcy laws in this country. Contrary to media hype and misinformation, most bankruptcies are caused not by irresponsible spending, but an unforeseen life event, such as unemployment, serious illness, or divorce.
Bankruptcy will Ruin My Credit Forever.
False. It is true that bankruptcy can be reported on your credit report for up to 10 years after your case is filed, but the actual effect on your credit score varies depending on what your score was before you filed bankruptcy, and it is temporary because you can start rebuilding your credit immediately after filing your case. In many cases, especially for people who have very low credit scores before filing bankruptcy, their credit scores go up shortly after filing bankruptcy, as long as they maintain payments on obligations thereafter.
Bankruptcy Relief is No Longer Available.
This is not true. The new bankruptcy laws have made the process more burdensome in some cases, and altered eligibility for certain people, but for most people, if they were eligible before, then they are likely eligible now for bankruptcy relief.
If I file bankruptcy I will have to repay some or all of my debts.
This is false in most cases. For individuals, Chapter 7 is still available for most people, as set forth above. Sometimes if the analysis shows too much income on either the means test or current budget, you may have to do a repayment plan in a Chapter 13, but not usually. And a Chapter 13 is still a very workable option with other benefits.
I will lose all my property if I file bankruptcy.
False. Whether you get to keep your property depends on the value (or amount of equity) in any particular item of property and what exemptions you have available to protect the value in that asset. In the vast majority of cases in Oregon and Washington, you will be able to keep your property. Of course, analysis by a bankruptcy professional is necessary to accurately make that determination.