Bankruptcy, like so many things in life, involves its fair share of lies. From the lie that it is free to the lie that it is easy, many misconceptions reside in the minds of those considering filing.
 
While there are probably dozens of lies, below are seven of the most common miscues about going bankrupt.

Lie # 1: Bankruptcy Gets Rid of All Debts
It’d sure be nice: simply file for bankruptcy and all your debt disappears like a prop at a magic show. Unfortunately, this isn’t at all accurate. Filling for bankruptcy does not get rid of all your debts. In fact, there are several kinds of debt that bankruptcy won’t touch with a ten foot pole.
 
Tax claims, alimony, child support, student loans and debt incurred illegally, such as through fraud, are immune to bankruptcy. This basically means even if you do declare bankruptcy, these debts, and those who want to collect on them, will not go away.
 
For anyone who makes a better than average living, filing for bankruptcy is even further complicated. Instead of simply wiping out debt, those with well paying jobs are forced into a Chapter 13 bankruptcy plan. This plan orders all disposable income be paid to a court-appointed trustee. This trustee takes the income and divides it among your creditors.

Lie # 2: Bankruptcy Provides a Fresh Start
Declaring bankruptcy does lessen the burden of debt, offering a temporary reprieve. However, it does not offer anyone a fresh start: bankruptcy sticks to your credit report and follows you for the next decade.
 
This may seem like no big deal: surely a lot of people have bad credit. But, having a bankruptcy filing on your credit score is comparable to financial leprosy. Many creditors, banks, and even auto dealers throw out loan applications from anyone who has filed for bankruptcy. This makes it hard to get a house, get an apartment, or even get a simple credit card.
 
On occasion, someone who has filed for bankruptcy may be approved for a loan. But, when this occurs, the interest rate is ridiculously high, forcing you to pay more than you would otherwise. No matter which way you spin it, bankruptcy affects your life for years to come.

Lie # 3: Bankruptcy is Easy to File
Though it might sound simple, bankruptcy is actually not at all easy to file. The first step usually involves meeting with a lawyer to discuss, and learn, your rights and the proper procedures to follow. Next comes the paperwork…all the paperwork.
 
Before you can file, you must prepare several documents in order to petition the court for a bankruptcy claim. These documents can easily involve hundreds of pages and just one mistake, a forgotten form or a typo, can cause your bankruptcy to be denied.
 
Once these papers are complete, you must file them with the US District Court’s bankruptcy division. If approved, you will then meet with your creditors. During this “Meeting of the Creditors” you can be questioned about your financial situation, your money owed, and your assets. Any creditor who wishes to contest your filing can do so during this meeting. Following the meeting, you must obtain your discharge.
 
The process is arduous, one that can take months to complete. It’s not only time consuming, but it can also consume you emotionally: it’s stressful, frustrating, and gut-wrenching.

Lie # 4: Bankruptcy if Free
It might be ironic that bankruptcy actually costs money, but it does. First of all, the court fees of simply filing for bankruptcy can cost at least $200, depending on where you live. Secondly, bankruptcy usually involves lawyers and - as we all know - lawyers aren’t cheap.
 
As mentioned above, filing for bankruptcy can be a confusing process. If it’s not done correctly, the process can be drawn out or negated altogether. For this reason, it’s essential that a lawyer - someone who knows the intricacies of the law - is hired. While hiring a lawyer benefits you emotionally - as they deal with the fine print - it can further ruin you financially, making bankruptcy a costly endeavor.

Lie # 5: You Can File For Bankruptcy Multiple Times
Some people believe that the sky’s the limit for the amount of times one can file for bankruptcy. However, this is not the case.
 
New laws have recently been enacted that set strict limitations on the amount of filing that can occur. For example, anyone who has filed for Chapter 7 bankruptcy won’t be able to file for another Chapter 7 for eight years. Anyone who has filed for a Chapter 13 bankruptcy must wait two years before filing for another one, or wait four years if they’ve previously filed a Chapter 7,11, or 12 bankruptcy. Plainly put, when it comes to bankruptcy, there is not a frequent filer program.

Lie # 6: You Won’t Lose Your House or Car
While many bankruptcy plans are aimed at helping you retain your residence and automobile, there are still no guarantees. Many times, people find it hard to pay off their loans and end up parting with their house or car to do so. Unfortunately, when it comes to bankruptcy, nothing we have seems to be untouchable.

Lie # 7: Your Spouse’s Credit Won’t be Affected
There are laws set in place that state one spouse’s bad credit can’t automatically make the others bad as well. But, this is assuming no joint accounts are involved.
 
If a husband files for bankruptcy, and has a joint checking account with his wife, her credit can take a hit. This is because their joint account will show up as a bankrupt account, causing anyone whose name is on it to reap the consequences.

Filing for bankruptcy does not offer a clean slate. Not only does a bankruptcy filing continue to haunt you financially, but the ramifications can stay with you emotionally and physically. For this reason, it should not be used as an easy way out, but as a very last resort.