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Bankruptcy Myths

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According to Joan Feeney in her book, The Road out of Debt, here are some common myths that people have when they think of "Bankruptcy".

Myth # 1: Bankruptcy Is Expensive.

For most people on the brink of bankruptcy, avoiding bankruptcy may be much more expensive and more difficult than filing for bankruptcy. Filing fees for chapter 7 and chapter 13 bankruptcies cost less than $300. When you hire a bankruptcy lawyer, the average cost of a chapter 7 case is approximately $1,500. For a chapter 13 bankruptcy case, you should expect to spend between $2,500 and $3,500 if you hire a bankruptcy lawyer. While not cheap, the amounts you will pay are minimal when compared to your costs of not filing. The interest alone on your outstanding debts will likely far exceed the costs to file. If you factor in the peace of mind that you will receive once you have put your debts to rest, the expense is well worth it. You will now be able to go forward refreshed.

Myth # 2: You're a Failure and a Bad Person.

Most bankruptcy filings result from events in people’s lives beyond their control: job loss, medical bills, divorce. Bankruptcy was set up as a safety net for such people. You, as have most people, have worked hard to pay your bills. And like most people, your inability to continue to pay has directly resulted from a life-changing situation, such as divorce or job loss combined with the severe economic recession that has affected the world. You must keep in mind that millions of businesses and individuals file for bankruptcy each year. These companies and people complete the bankruptcy process and again become productive members of society. Bankruptcy filers are not bad people or irresponsible companies. In many ways, bankruptcy filers are responsible and conscientious because they seek to confront their financial problems rather than running away and avoiding creditors. Filing for bankruptcy can be a responsible decision.

Myth # 3: Saying "I Declare Bankruptcy" in a Public Place Is the Same as Filing for Bankruptcy.

You may have seen this approach on television (e.g., Michael Scott on The Office), but a simple declaration does not file a bankruptcy. To file bankruptcy you have to submit a petition, a list of creditors (a matrix), and other documents, usually electronically, in the clerk's office at your bankruptcy court.

Myth # 4: Avoid Bankruptcy at All Costs.

If you can work out your debts and maneuver past the hurdles erected by the credit and lending industries without bankruptcy, of course you should avoid it. But never consider avoiding bankruptcy “at all costs.” Some costs are just too much to bear. Remember, bankruptcy allows you to make a fresh start and discharges many of your debts to creditors. The longer you remain out of bankruptcy, the longer banks and creditors will pursue you for payments on their debts and the amount you owe them will grow larger due to interest accrual. Creditors will fight hard to persuade you that bankruptcy is a remedy you should never pursue. They’ll tell you this because they don’t want you to be in bankruptcy where they lose their power over you. No one knows your unique circumstances. Only you can decide whether bankruptcy is right for you. You have to weigh the positive and negative factors of your own bankruptcy for yourself. 

Myth # 5: Everyone Will Know. 

Few people will ever know you commenced a bankruptcy unless you decide to tell them―unless you are a prominent person in the community, a celebrity, or executive of a well-known corporation about whom or which the media decides to publish a story. Most people are busy with their lives and aren’t concerned with following bankruptcy cases.


If you have borrowed money from your neighbors or relatives, which we advise against, then they as your creditors will know and will be sent notice of your bankruptcy filings. Except for that, the chances are very good that the only people who will know about your bankruptcy will be you and your creditors. Bankruptcy is a public legal proceeding with a public record. Thousands of people file bankruptcy each day. Most people do not keep track of the filers and very few publications have the space, resources, or desire to publish bankruptcy filings. Unless you have a nosy neighbor, it is unlikely that anyone will know about your bankruptcy. But even if it’s made publicly known, you should maintain that bankruptcy is the right thing to do. So what if everyone knows? With so many people being forced to file for bankruptcy, few give it a second thought. After having seen the trillions of dollars the United States has given to companies in financial trouble in recent years, most people see bankruptcy court as an appropriate place for people to resolve their financial problems.

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(256) 617-7115

Law Offices of Joseph G Pleva
3330 L & N Drive SW, Suite C
Huntsville, AL 35801
(256) 617-7115

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