Common Bankruptcy Myths in OR | Portland, Oregon

Common Bankruptcy Myths in OR

Debunk the Myths and Unveil the Truths about Bankruptcy in Portland, OR

In the city of Portland, Oregon, financial struggles can be common for many residents. Bankruptcy often emerges as a potential solution amid the weight of mounting debt. However, misconceptions and myths surrounding bankruptcy can deter individuals from seeking the relief they deserve.

At Michael D. O’Brien & Associates, P.C., we understand the complexities of financial hardship and the stigma associated with bankruptcy. We are committed to dispelling the common bankruptcy myths in OR and providing clear, informed guidance to those considering bankruptcy as a path to financial recovery.

We invite you to connect with our legal team for personalized guidance and a deeper understanding of your situation. We are dedicated to providing clarity and support throughout the bankruptcy process. Take the first step toward financial stability by scheduling a free consultation today. Let us help you dispel the myths, explore your options, and pave the way toward a brighter financial future.

Short Summary

  • Bankruptcy is a legal process for financial relief from overwhelming debt. It involves court proceedings to manage or eliminate debt and aims to provide individuals and businesses with a fresh start.
  • The most common types of bankruptcy are Chapter 7 and Chapter 13. 
  • Everyone will know you filed for bankruptcy. It is public record, but it is unlikely anyone will review it due to the volume.
  • Filing means giving up possessions, but rare cases involve losing belongings. Exemptions protect assets like homes or cars.
  • You’ll never get credit again, but individuals already have credit risks. Bankruptcy may improve credit due to reduced debt.
  • Bankruptcy hurts credit for ten years and stays on one’s credit report for a decade, but credit access can be sooner, with improvement in two to four years.
  • Another bankruptcy myth is there is only one chance to file bankruptcy, but one can amend filings. A Beezley claim in Chapter 7 allows the inclusion of missed debts.
  • Only deadbeats file for bankruptcy, but financial distress from divorce, unemployment, health issues, and overextension affects anyone.
  • Bankruptcy hurts credit, but that is crucial for rebuilding credit. Discharging bad debts positions them as a better credit risk.
  • Creditors will harass you even after filing, but an automatic stay prohibits all collection actions; creditors must cease contact.
  • Only one bankruptcy filing is allowed, but you can file for Chapter 7 once every eight years, and there is a restriction for Chapter 13.
  • One can pick and choose debts to list. But comprehensive listing is required by law; continuing payments are possible for specific debts.
  • Filing for bankruptcy is challenging, but with an experienced attorney, filing is straightforward and guided.
  • Taxes cannot be eliminated through bankruptcy. However, if income taxes are filed on time, due over three years ago can be eliminated in Chapter 13. 

Remember, you are not alone in facing financial challenges. We are here to support you on your journey toward financial well-being.

What is Bankruptcy?

Bankruptcy is a legal process designed to provide financial relief to individuals and businesses facing overwhelming debt. It involves a court proceeding during which a person or business can seek assistance managing or eliminating their debt. The primary goal of bankruptcy is to give individuals and companies a fresh start by either reorganizing their financial affairs or liquidating assets to repay creditors.

What are The Types of Bankruptcy?

There are different types of bankruptcy, the two most common being Chapter 7 and Chapter 13 in the United States:

  • Chapter 7 Bankruptcy:
    • Often referred to as liquidation or straight bankruptcy
    • Involves the sale of non-exempt assets to repay creditors
    • Many unsecured debts (such as credit card debt) may be discharged, meaning the debtor is no longer legally required to pay them.
  • Chapter 13 Bankruptcy:

What are the Most Common Myths About Bankruptcy in Portland, OR?

Bankruptcy myths are common. Here are some of the frequently held misconceptions about bankruptcy:

Myth 1: Everyone will know you have filed for bankruptcy.

Although bankruptcy is a matter of public record, the sheer volume of filings makes it highly unlikely that anyone you know will take the time to examine new cases. While a few business-focused newspapers may publish bankruptcy information, most widely read publications do not. 

Additionally, such details are typically placed inconspicuously on the back pages with small print, reducing the likelihood of public attention. Furthermore, recent regulations mandate the disclosure of only the last four digits of your social security number in the public record. The complete number is accessible only to the court, the trustee, and the creditors officially notified about your case.

Myth #2: Filing for bankruptcy means you must give up your possessions.

In most cases, individuals do not lose their belongings in bankruptcy unless it is a specific and uncommon circumstance – and you will be informed of this before you decide to file for bankruptcy.

Despite numerous alarming stories circulating online about people losing their possessions after filing for bankruptcy, the reality is far less sensational. Most individuals who go through bankruptcy proceedings do not have to part with their belongings unless they willingly choose to do so. Typically, you can retain ownership of your home, car, retirement savings, and personal items, as these can often be exempted from bankruptcy under the law up to a specified value. 

While each bankruptcy case is unique, clients are often pleasantly surprised by the wide range of things that can be safeguarded. For instance, future tax refunds are a common concern discussed online in the context of debt elimination, especially in Oregon. However, this scenario is nearly unheard of, given that a change in Oregon bankruptcy law in July 2013 now permits Oregon residents to utilize federal bankruptcy exemptions.

Myth 3: You will never get credit again.

Many consumers fail to realize that they likely already pose a significant credit risk, facing limited or nonexistent borrowing options. Instances of delinquencies, defaults, lawsuits, judgments, garnishments, repossessions, and foreclosures can inflict more harm on a credit score than filing for bankruptcy. 

Despite the perception that a bankruptcy filing may remain on the credit report for up to a decade, it doesn’t necessarily mean that the discharged debtor will be barred from obtaining loans. Some debtors might witness an improvement in their credit score post-bankruptcy. This positive effect could stem from the protection of their future wages and a reduction in their debt-to-income ratio.

Myth 4: Filing bankruptcy will hurt your credit for ten years.

While bankruptcy stays on your credit report for a decade, you can typically access credit much sooner. Many individuals can purchase a car or a home shortly after their case is discharged. Moreover, numerous people experience significant improvements in their credit scores within two to four years. It is usual to receive unsolicited credit card offers and financing offers for cars shortly after filing your case, and again following the discharge.

Myth #5: You only get one chance to file bankruptcy. If you forget to include a debt, you lose your chance to eliminate that debt.

In most scenarios, if you overlook or are unaware of specific claims, they can be included in your bankruptcy case even if they were not initially accounted for. If you are contemplating bankruptcy, it is likely you have been avoiding collection letters, bills, and calls from creditors for quite some time. You might not have a clear picture of how much you owe or to whom, and the fear of forgetting something crucial could be a factor causing a delay in pursuing bankruptcy.

Many individuals share this concern, worrying that they only have one opportunity to file for bankruptcy and that missing a debt in the initial filing means losing the chance to include it later. However, this is a misconception. If you unintentionally omit a debt from your bankruptcy petition, your attorney can usually make amendments at a later date. The law permits individuals, with the assistance of their lawyers, to update the documents they submit, allowing for the addition of any overlooked bills.


Additionally, in Chapter 7 bankruptcy cases, there is a special provision known as a Beezley claim. That occurs when a creditor is uninformed of a debt in your bankruptcy case. Under the Beezley claim provisions, even if you have not listed the debt, it can be discharged in your bankruptcy under the right circumstances.

Myth 6: Only deadbeats file for bankruptcy.

Financial distress and the potential for bankruptcy often stem from four common factors: 

1) divorce or separation; 

2) unemployment or underemployment; 

3) health issues; and 

4) overextension or mismanagement. 

In some cases, multiple factors may contribute to a bankruptcy situation. Regardless of diligent saving and preparation, the reality remains that unforeseen circumstances beyond one’s control can result in a financial catastrophe. The bankruptcy court is not exclusive to any particular profession or income level—entertainers, professional athletes, politicians, and individuals with blue-collar jobs or fixed incomes—may all find themselves facing bankruptcy.

Myth 7: Filing for bankruptcy will hurt your credit.

While it may be commonly believed that bankruptcy harms your credit, this is often not the case. In reality, bankruptcy can be a crucial step toward rebuilding your credit. By discharging your existing bad debts, you become a more attractive prospect to many lenders, positioning you as a better credit risk. 

Consider bankruptcy as a clear line of separation between the old, unfavorable credit already on your credit report and the potential for new, positive credit to be added. Without taking action, the cycle of negative credit reporting can persist, but bankruptcy interrupts this pattern to establish new, favorable credit on your report.

Myth 8: Even if you file for bankruptcy, creditors will still harass you and your family.

This assertion is inaccurate; in fact, it is quite the opposite. The moment you initiate a bankruptcy filing, the Bankruptcy Court issues a directive instructing all your creditors to cease any contact with you. This includes no more phone calls, collection letters, lawsuits, repossessions, foreclosures, or any other forms of collection efforts. This directive is formally known as the “automatic stay,” as outlined in 11 United States Code, Section 362. The automatic stay has the comprehensive effect of prohibiting all collection actions, and creditors are not permitted to communicate with you after you file for bankruptcy. 

Moreover, any ongoing collection attempts must be immediately halted by the creditor. The automatic stay is a potent tool, leveraging the authority of the United States Courts to ensure that creditors refrain from pursuing you. If a creditor breaches the automatic stay, you have the right to bring the matter before the Court for Contempt of Court, with potential compensation for any damages incurred.

It’s essential to note that Bankruptcy Court Judges strongly disapprove of creditors who disregard the automatic stay, and they are known to impose severe consequences on such creditors. In simple terms, once you file for bankruptcy, creditors are legally obligated to desist from any further actions against you, or they risk facing serious consequences.

Myth 9: You can only file once for bankruptcy protection.

The reality is that you are only eligible to file for Chapter 7 bankruptcy once every eight years. However, once this period has elapsed, you can file again if necessary. In contrast, there is no such limitation for filing a case under Chapter 13 of the Bankruptcy Code. Ideally, though, it is hoped that you will never find yourself in a situation requiring more than one bankruptcy filing.

Myth 10: You can pick and choose which debts and property to list in your bankruptcy.

Sorry, but it’s not permissible. Engaging in such actions would violate the law. In both Washington and Oregon states, bankruptcy filings require a comprehensive listing of all assets and liabilities. While individuals may be tempted to omit a debt to continue payments, it is crucial to note that the law mandates the inclusion of all debts. The positive aspect is that the same objective can be achieved even while listing the debt. If there’s a desire to continue paying a specific debt after bankruptcy, that option is available. 

Post-bankruptcy, individuals can resume payments to any creditor they choose. It is noteworthy that certain debts must be maintained even after bankruptcy. For example, continued payments are necessary to retain property ownership if there’s a loan for a car, truck, or house, despite including it in the bankruptcy filing. Importantly, staying current on the loan and ensuring proper insurance coverage provides legal protection. The law safeguards individuals who fulfill these requirements, allowing them to keep the property, as creditors are legally constrained from taking any action against them.

Myth 11: It is challenging to file for bankruptcy, especially under the new law.

No, it is not, especially when an experienced bankruptcy attorney guides you. With the skills of a seasoned bankruptcy attorney, filing for bankruptcy becomes straightforward. While deciding to file may be rough, filing becomes easy with the proper legal assistance.

Myth 12: You cannot get rid of taxes if you file for bankruptcy.

Generally, if the tax is an income tax that was filed on time and was due more than three years ago, you can eliminate the tax debt. Even if the tax cannot be eliminated, you may be able to use Chapter 13 to pay back the tax over five years. Determining whether or not taxes can be eliminated (discharged) can be tricky, especially if you have had a prior bankruptcy or an offer in compromise. It is best to talk with a lawyer so you will know if bankruptcy can help you.

Contact Our Oregon Bankruptcy Attorneys Today!

Bankruptcy is often misunderstood and shrouded in myths, preventing individuals from seeking the relief they deserve. At Michael D. O’Brien & Associates, P.C., we are committed to dispelling the common bankruptcy myths in OR and providing compassionate, legal guidance to those considering bankruptcy.

Our team understands the financial challenges and emotional turmoil that accompany debt struggles. We are committed to helping you navigate the bankruptcy process confidently and clearly, ensuring your rights are protected and your best interests are served.

If you are considering bankruptcy, do not hesitate to contact our law firm for a free consultation. We will listen attentively to your concerns, assess your unique situation, and explain your options clearly and straightforwardly.

Remember, you are not alone. We are here to support you on your journey toward financial stability and a fresh start.

Additionally, if you want to know more about debt alternatives or need assistance with estate planning, don’t hesitate to contact Michael D. O’Brien & Associates, P.C. for a free consultation. We are here to help you achieve your financial goals and secure your future.

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