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Column: Nonprofit Dispels 7 Common Myths about Consumer Bankruptcy

Published in the Pasadena Independent

Nonprofit credit counseling agency separates bankruptcy fact from fiction

Bankruptcy may seem like the perfect cure-all for consumers buckling under heavy debt, but many people don’t really understand the process or the repercussions. With so many myths surrounding bankruptcy, it’s hard to know when it’s an appropriate course of action and when it’s not.

“The economy is improving, but many people are continuing to suffer the ripple effects of a terrible recession,” said Mike Sullivan, director of education for Take Charge America, a national nonprofit credit counseling and debt management agency. “For some, bankruptcy is the best option, but few people truly understand the ins and outs of filing.”

To help consumers better understand bankruptcy, Sullivan dispels seven common myths:

  1. Bankruptcy erases all debts. Many people believe bankruptcy will give them a fresh, debt-free start, but student loans, child support and alimony, criminal restitution and debts resulting from fraud are not discharged by bankruptcy.
  2. I’ll lose everything I own. Bankruptcy laws vary from state to state, but every state provides exemptions protecting certain assets including homes, automobiles, household goods and retirement savings.
  3. My spouse has to file, too. It’s not uncommon for one spouse to carry significant debt in his/her name only. Married couples with joint credit cards or other debts for which they’re both liable will need to petition for bankruptcy together.
  4. I don’t have enough debt to file bankruptcy. Actually, there is no minimum debt required. Bankruptcy is a consideration for people who can’t pay their debts under normal circumstances with their current income. However, the cost of filing for bankruptcy can range from a few hundred dollars to a few thousand, so consumers without a lot of debt may not benefit.
  5. I’ll lose my job if I declare bankruptcy. This is a common concern among people considering bankruptcy, but federal law prohibits such discrimination.
  6. Creditors will continue to harass me after I file. Consumers who have suffered creditor harassment are happy to learn it’s illegal for debtors to contact them once bankruptcy is filed.
  7. I can rack up debt before bankruptcy, and won’t have to pay it back. Many people assume they can spend with abandon and then have those debts discharged. However, such activity will incur serious consequences, as the legal system considers this fraud.

Consumers who are struggling to repay their debts may benefit from working with a nonprofit credit counseling agency such as Take Charge America. For more information about credit counseling, debt management and bankruptcy counseling, call (888) 822-9193 or visit

About Take Charge America, Inc.: Founded in 1987, Take Charge America, Inc. is a nonprofit agency offering financial education and counseling services including credit counseling, debt management, student loan counseling, housing counseling and bankruptcy counseling. It has helped more than 1.6 million consumers nationwide manage their personal finances and debts. To learn more, visit or call (888) 822-9193.

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