You know all those bad things you've always heard about bankruptcy.
There is a reason this section is titled Myths, most of them are not true. Need Proof? Let's take them on ...right here...right now.
Here are the some most common myths creditors want people to believe and the proof as to why every one of them is NOT TRUE.
Myth 1: Under the NEW bankruptcy law, there's no more
bankruptcy and no more help (or it's too late to file).
Not True. In fact...nothing could be further from the truth. Sure you heard it in the press, but it's just not true. The news media overhyped the whole story. The truth is that you can do almost everything under the NEW law that you could do under the OLD law. In some ways, the new law actually increased the benefits of filing bankruptcy. Many clients are getting a better break under the NEW law, than they would have gotten under the OLD law. Want proof? The new law makes it possible for clients in a bankruptcy debt consolidation to save for retirement. This was not allowed under the old law. Before the Chapter 13 Trustees would not allow for 401(k) contributions or 401(k) loan repayments. Congress now specifically provides for it in a bankrutpcy debt consolidation. Surprised? So were we, but it's the truth. Find out for yourself.
Just call toll free to 1-800-966-8447 to set up a totally FREE initial consultation.
That NEW bankruptcy law: We Figured It Out. Want to find out more? (Click Here)
Myth 2: Everyone will know you have filed for bankruptcy.
Folks, unless you're a prominent person or a major corporation and the filing is picked up by the media, the chances are very good that the only people who will know about a filing are your creditors and the people who you tell. While it's true that your bankruptcy is a matter of public record, the number of filings is so massive, that unless someone is specifically trying to track down information on you, there is almost no likelihood that anyone will even know you filed. However...telling someone that someone else filed bankruptcy is good gossip...just like telling a someone you heard so-and-so is getting a divorce. So...if you don't want everyone you know to know you filed bankruptcy....you need to keep the information to yourself. As for newspapers...my experience is that most papers don't include information about who filed bankruptcy.... and even if they did...think about it....who would be interested enough to read that stuff.
Myth 3: You will lose everything you have.
The Bankruptcy Code provides for you to keep your home, cars, furniture, appliances, employer sponsored retirement and other essentials that you need to get your fresh start. Though it is true that there are limits to the values of what you can keep in bankruptcy, many people are not required to give up anything. In general, fears of losing property are overblown by the credit industry.
While laws vary from State to State, every State has exemptions that protect certain kinds of property. Using Indiana as an example.....there are exemptions to protect such things as your house, your car, your truck, household goods and furnishings, IRAs, retirement plans, the cash value in life insurance, and wages. In those rarer situations where you have more property than can be protected by available exemptions, there is Chapter 13 (debt consolidation). In Chapter 13, you can even keep this property by paying a higher Chapter 13 plan payment.
Filing bankruptcy does not generally wipe out liens. Therefore, if you want to keep a car, truck, home or business equipment that serves as collateral for a loan....you need to keep paying on the debt. If you make these payments and have exemptions to cover any value above what is owed, you can rest assured you will be able to keep these items.
Myth 4: Your Immigration Status Will Be Affected By Bankruptcy .
Not true. Many people worry that they will jeopardize their immigration status if they file for bankruptcy. This is incorrect. Your immigration status is not affected in any way by filing for bankruptcy.
Myth 5: You will never get credit again.
Quite the contrary. We hope you will not go into bankruptcy with the intent of getting back into debt. The negative impact of bankruptcy on credit is extremely exaggerated. It won't be long before you're getting credit card offers again. You should, however, refuse all offers of credit cards until you've put together a realistic savings plan. Once you’ve put a savings plan into place and start to build up your "cash cushion" you will be able to start thinking about new credit. If you want to buy a home or car after bankruptcy you will probably be pleased. We have seen many bankruptcy clients go on to purchase a home within two years of filing a Indiana bankruptcy - but only if they've taken the steps necessary to establish their own financial stability.
Myth 6: Filing bankruptcy will hurt your credit for 10 years.
Not true. You are getting 2 completely different concepts confused with each other. You are getting the fact that bankruptcy is reported on your credit report for 10 years mixed up with the effect that reporting will have on your credit. Just because something is reported on your credit report does NOT necessarily mean it will have a negative effect on your credit standing.
First...let's get one thing out in the open. By the time you need to make an appointment to see a bankruptcy attorney.....your credit is already messed up or maxed out...or both. This being the case....you have no credit for bankruptcy to hurt. Furthermore...as I mentioned above...in my experience...if you have not re-established good credit in 2 to 4 years after you file bankruptcy.....most likely....it has nothing to do with the fact that you....once upon a time....filed bankruptcy...and it certainly has absolutely nothing to do with the fact that your credit history still shows an old bankruptcy.
Myth 7: If you're married...both you and your spouse have to file
for bankruptcy.
Not true. It's not uncommon for one spouse to have a significant amount of debt in their name only. However, if spouses have debts they want to discharge that they're both liable for, they should file together. Otherwise, the creditor will simply demand payment for the entire amount from the spouse who didn't file.
Myth 8: It's really hard to file for bankruptcy.
No....it's not....at least not in the hands of an experienced bankruptcy attorney. In the hands of an experienced bankruptcy attorney...filing bankruptcy is easy. The decision to file may be hard...but once the decision is made...the filing part is easy.
Myth 9: You have to be broke to file for bankruptcy.
You can be employed, have a bank account and own property up to certain limits as of the date your bankruptcy case is filed. Once your case is filed you can have anything you want and nobody - the court or your creditors - can touch it. In fact, a New York City man recently bought a winning lottery ticket after he filed his bankruptcy case and was able to keep all of his winnings.
Myth 10: Filing bankruptcy means you're a bad person.
Not true. There's a reason over 1,000,000 Americans file bankruptcy each year...and it's not because they're bad people. Lots of good, honest, hard-working people fall on hard times. Let's face it....life can be brutal....and sometimes...the money's just not there. The bankruptcy law were created with this in mind...to make sure you have a way....if need be....to get free from the burden of debt...so that you...and your family....can have a second chance at a "fresh start".
Myth 11: Filing for bankruptcy will hurt your credit.
That's not true. Think about it. By the time you come to a bankruptcy attorney....your credit is already either messed up or maxed out. And if it's already messed up or maxed out....how can bankruptcy hurt it?
There are items on your credit report worse than bankruptcy. Tax liens and judgements can be more alarming to a credit reviewer than a bankruptcy. A tax lien or judgment is a red flag to a lender. The big surprise for my clients is when I tell them that filing bankruptcy can actually help them re-build their credit, especially in a Chapter 7 case. Bankruptcy gets rid of debt....and getting rid of debt puts you in a better position to handle new credit....if only someone will give it to you. Therefore....bankruptcy is the first step in the process of re-building your credit.
Myth 12: Even if you file for bankruptcy, creditors will still
harass you and your family.
This is NOT true. In fact, nothing could be further from the truth. The minute you file bankruptcy, the Bankruptcy Court issues an order telling all of your creditors to leave you alone. No more phone calls. No more collection letters. No more lawsuits. No repossessions. No foreclosures. Nothing. This order has a name. It is called the "automatic stay"; and it is issued pursuant to 11 United States Code, Section 362. The automatic stay prohibits you from any and all collections actions. After you file bankruptcy, the creditor is not even allowed to talk to you. In addition, the creditor must stop any collection attempts already started. The automatic stay is very powerful, and puts the full weight of the United States Courts to work for you, to make sure your creditors leave you alone. If a creditor violates the automatic stay, you have the right to bring the creditor before the Court for Contempt of Court, and to be compensated accordingly. Believe me, Bankruptcy Court Judges do not take kindly to creditors who ignore the automatic stay, and these Judges have been known to punish creditors severely. Very simply, once you file for bankruptcy, creditors must leave you alone or suffer the consequences.
Myth 13: If you file for bankruptcy, it may cause more family
troubles and may even lead to divorce.
This is NOT true. Usually, it works just the opposite. Filing bankruptcy is not the problem. The problem is not being able to pay your bills. All good, honest, hard-working people feel a strong need to pay their bills, and not being able to do so, causes them to feel tremendous stress. Unless you do something to relieve this stress, the stress can quickly build to the breaking point....the marriage breaking point. Bankruptcy is designed to get you out from under the burden of debt, to protect your property and to lower your stress level. If your experience is like that of other couples, you will find that filing bankruptcy... and lowering the stress level.... can be a crucial first step in bringing the love and caring back into your relationship....which.....in turn.....gives your marriage a fighting chance.
Myth 14: You can't get rid of back taxes through bankruptcy.
We get rid of old "income" taxes for our clients all the time. By "old"...I mean income taxes more than 3 years old. Under the law...there are 3 or 4 qualifications that have to be met....but once these are met....these taxes are gone. Please note: Filing bankruptcy does NOT get rid of withholding or sales taxes...no matter how old they are.
Myth 15: You can only file once for bankruptcy protection.
The truth is....you can file and get a 'discharge' under Chapter 7 once every 8 years. As for filing a Chapter 7 after filing and getting a discharge in Chapter 13, the wait is 6 years, computed from 'date of filing' to 'date of filing'. As for filing a case under Chapter 13 of the Bankruptcy Code....the wait is only 4 years after a prior discharged Chapter 7 or 2 years after a prior discharged Chapter 13 case, computed from 'date of filing' to 'date of filing'.
There is no required wait time between bankruptcy flings, if the prior bankruptcy case was 'dismissed', as opposed to 'discharged', unless there is a specific court order to the contrary. Hopefully...however...you will never need to file more than one bankruptcy.
Myth 16: You can pick and choose which debts and property
to list in your bankruptcy.
I'm sorry...but you can't. Doing so would be against the law. Under the law...when you file bankruptcy...you have to list all your property and all your debts. Most people want to leave out a debt because it is their intent to keep paying on it. The good news....on this score....is that you can achieve the same goal, even though you have to list the debt. If you want to keep paying on a debt...after bankruptcy....you can. After bankruptcy....you can go back and pay anybody you want. In fact...after you file bankruptcy....there are some debts you have to keep paying on. For instance....if you have a car, truck or house loan....even though you list the debt in your bankruptcy....if you want to keep the car, truck or house....you have to keep paying on the debt. More importantly....you need to know this. As long as you stay current on the loan...and keep the property properly insured....you are protected under the law .... and you get to keep the property....because...under the law...the creditor is stuck with you and can't do anything about it.
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