Myths Creditors Tell You About Bankruptcy
Guess what? You have the wrong information about bankruptcy. Pride and fear of the unknown hold many worthy individuals from taking advantage of this federally sanctioned process. The following information is provided to remove some widely held myths about bankruptcy. To be sure, bankruptcy has a complicated landscape, but I can help you to determine whether bankruptcy is the right for you. The initial consultation with a bankruptcy attorney is free. You owe it to yourself and your family to call.
Bankruptcy Myth 1: Everyone will know you have filed for bankruptcy
Not True. Look, bankruptcy is of public record but no one cares unless you're a prominent person or a major corporation. Even then, the only people who care about the bankruptcy filing is news media. For the 99% ofthe world, the chances are very good that the only people who will know about a filing are your creditors and the people who you tell. 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.
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Bankruptcy Myth 2: You will lose everything you have
Not true. Because of the numerous Indiana exemptions, , most people who file for bankruptcy protection in Indiana do not lose any property at all. Those with substantial property can usually keep their property if they agree to pay back some or all of their debt to creditors in a Chapter 13 bankruptcy. The truth is bankruptcy gives you the opportunity to keep your property. Outside of bankruptcy you could lose your property to creditors, but once you have filed for bankruptcy you and your property are protected. Indiana has specific 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, wages, and personal injury claims. In those rarer situations where you have more property than can be protected by available exemptions, there is Chapter 13. In a Chapter 13 you can even keep this property by paying a higher Chapter 13 plan payment.
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Bankruptcy Myth 3: You will never be able to own anything again
Not true. While the filing for bankruptcy may feel like a low point, it can have the benefit of setting your finances on firm ground. That way, with proper budget management, you can buy, own and possess whatever you can afford as you go forward in life.
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Bankruptcy Myth 4: You will never get credit again
Not true. Bankruptcy gets rid of debt and getting rid of debt puts you in a position to handle more credit, if you so choose, and this makes you look more attractive to would-be lenders. In many cases, clients report having an easier time obtaining credit after bankruptcy, because the process has freed them from so much debt and has significantly improved their debt to income ratio. Over time, if you are careful, and keep your job, and start saving money, and pay your bills, and do things that will put good marks on your credit report, the quality of your credit will get better and better.
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Bankruptcy Myth 5: Filing bankruptcy will hurt your credit for 10 years
Not true. Bankruptcy stays on your credit about 7 to 10 years. Although the bankruptcy will stay on your credit, you can start rebuilding your credit once your bankruptcy is discharged. Just because something is reported on your credit report does NOT necessarily mean it will have a negative effect on your credit standing. By the time you need to make an appointment to see a bankruptcy attorney your credit is already messed up, maxed out, or on a clear path to ruin. This being the case, you ultimately have no credit for bankruptcy to hurt. Furthermore, as mentioned above, in our 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.
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Bankruptcy Myth 6: If you're married...both you and your spouse have to file for bankruptcy
Not true. While in many cases where both husband and wife have a lot of individual debt, it is advised for them to file jointly (because it saves money); it is never a bankruptcy requirement. Sometimes, there are good reasons for only one spouse to file.
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Bankruptcy Myth 7: It's really hard to file for bankruptcy now
Not true. At least not in the hands of an experienced bankruptcy attorney. The bankruptcy reform act changed only the method in which debtors qualify for the different types of bankruptcy. 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. It doesn’t prevent people from filing and in most situations people are still able to get the same relief now as before the law changed.
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Bankruptcy Myth 8: Only deadbeats file for bankruptcy
Not true. Congress created bankruptcy laws to help good people who get into debt for reasons which are beyond their control Most of the people who file bankruptcy are good, honest, hard-working people, just like you and me, who file as a last resort after months or years struggling to pay the bills that left over from some life-changing experience, such as a divorce, the loss of a job, a failed business venture, a serious illness, or some family emergency, or because they honestly and mistakenly fell into debt at a young age before they knew better, before they knew anything about budgeting or how to manage money. When good people have serious financial problems, they owe it to themselves and their families to consider bankruptcy. Bankruptcy can provide the relief that good hardworking people need to get them out of the bad time.
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Bankruptcy Myth 9: Filing bankruptcy means you're a bad person
Not true. Bad times don’t make a person bad. 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. Bankruptcy is a solution to help good people go through a bad time. It provides hard working people with the fresh start that they deserve, but are not able to obtain.. 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".
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Bankruptcy Myth 10: Filing for bankruptcy will permanently hurt your credit
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? The big surprise for our clients is when we tell them that filing bankruptcy can actually help them re-build their credit. 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.
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Bankruptcy Myth 11: Even if you file for bankruptcy, creditors will still harass you and your family
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". The automatic stay protects you from any and all collection 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.
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Bankruptcy Myth 12: If you file for bankruptcy, it may cause more family troubles and may even lead to divorce
NOT true. Usually, it works just the opposite. Bankruptcy eliminates debt eliminating financial stress. 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.
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Bankruptcy Myth 13: You can't get rid of back taxes through bankruptcy
While it is true that some taxes will not be discharged, others can be. There are many rules which an attorney can explain to you. Our office gets 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 additional qualifications that have to be met, but once these are met these taxes are gone. Please note: Filing bankruptcy does NOT get rid of state withholding or state sales taxes no matter how old they are.
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Bankruptcy Myth 14: You can only file once for bankruptcy protection
You can file for bankruptcy as many times as you like. Although, you are limited by how often you can receive a discharge. You can receive a discharge from Chapter 7 bankruptcy once every 8 years. You can receive a discharge from Chapter 13 bankruptcy every three years. If you get discharged in a Chapter 7 bankruptcy you have to wait 4 years before being eligiable to file a Chapter 13 bankruptcy in which you could receive a discharge. If you get a Chapter 13 discharge then you need to wait 6 years (normally) to file a Chapter 7 bankruptcy where you would be eligible to recieve a discharge. However, there is no waiting period if your case is dismissed. You can file back to back should you choose. Hopefully, however, you will never need to file more than one bankruptcy.
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Bankruptcy Myth 15: You can pick and choose which debts and property to list in your bankruptcy
NOT true. Sorry, but you can't. You do have to list all of the debts that you owe and the property that you own. 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. You just are not legally obligated to do so.
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Bankruptcy Myth 16: If I file, I will lose my Pension, IRA, or 401(k)
NOT true. In Indiana, these assets are generally exempt (exceptions exist for inherited IRAs). You will keep your pension, IRA, and 401(k) in a bankruptcy.
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Bankruptcy Myth 17: My bankruptcy will hurt my spouse's credit
If you choose to file separately, or if your wife chooses not to file at all, your filing will not affect his/her credit except to the extent the spouse has joint debt with you or is an authorized user on your individual credit. Your spouse's income will be reviewed to determine your eligibility for filing, but neither your spouse’s name nor social security number will be disclosed in the petition.
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Bankruptcy Myth 18: Bankruptcy will prevent my paying debts I want to pay
Nobody will stop you from paying a debt you wish to pay. After your discharge, you can choose which debts to pay and which ones not to pay.
Indianapolis Kokomo Bankruptcy Attorney
Contact the law firm of Steven P. Taylor, P.C. in his Indianapolis bankruptcy office at (317) 271-1111 or his Kokomo bankruptcy office 765-868-0807 for a free consultation to determine if bankruptcy is right for you. Attorney Steven P. Taylor’s practice is focused on consumer bankruptcy law and he possesses the knowledge and experience necessary to guide you through a successful bankruptcy filing.
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