Common Bankruptcy Myths
I’ll automatically lose my home, car, and valuables if I file bankruptcy.
Most debtors do not lose property as a result of filing bankruptcy because most property is protected by exemptions. That means that the majority of debtors retain their home, car(s) and valuables. However, there may be circumstances when property is not protected or fully protected. We identify any unprotected property before filing bankruptcy and strategize with you to meet your goals. Many strategies are available to allow debtors to keep what is important to them.
Bankruptcy cannot help me if a garnishment and/or foreclosure has already started.
Bankruptcy is the fastest way to stop a garnishment or foreclosure. In most cases, creditors must immediately stop all legal proceedings once a bankruptcy is filed. This rule applies both before and during legal actions. It is important to note that your level of protection is related to when the bankruptcy case is filed. Scheduling an initial consultation sooner rather than later will allow you to maximize your legal rights and know your options in time to take advantage of them.
I’ll be permanently “black-listed” for future credit and will not be able to rebuild credit by purchasing a house or car if I file bankruptcy.
Bankruptcy typically does not significantly worsen your credit record. Most debtors’ credit records already have negative reporting related to non-payment or slow pays. The bankruptcy will temporarily lower a credit score but then begins to improve it, because creditors are not continuing to report defaults. Many lenders want to work with debtors following a bankruptcy because the debtors have less existing debt. In addition, many debtors’ credit scores are competitive with the general public two to four years after completing their bankruptcy. We can connect clients with programs designed to assist the rebuilding process.
Bankruptcy cannot help me if I am currently paying creditors and/or I make a decent living but still feel overwhelmed.
Bankruptcy is available to anyone regardless of your income level or your record of paying bills. We often help people who are paying their bills and have steady income but recognize that they cannot “keep it up much longer” due to increasing payments, changing life circumstances or a painful reality check. Chapter 13 repayment plans typically allow partial repayment of credit card/miscellaneous creditors based on your budget. After three to five years of plan payments, the unpaid balances are forgiven. This powerful option provides an exit strategy for overwhelming debt. Consider that if you pay the typical minimum monthly payments on a $15,000.00 balance, you will not pay off the debt during your lifetime (2% minimum payment of $15,000.00 with a 20% interest rate = 94 years to pay off the debt and $88,084.00 paid to the creditor).
Bankruptcy must be my last resort after trying debt settlement, debt consolidation and selling off my property to make ends meet.
Delay caused by pursuing other options which do not solve the problem can result in losing your full range of choices and legal rights. Debt settlement and voluntary consolidation programs may not always be appropriate or your best options. This is especially true if you have fallen behind on auto or house payments, or if you have significant debt and few assets. You should exercise caution by getting all the facts, including bankruptcy information, before entering these programs or selling your possessions, to ensure you will not be harmed. Our office will analyze whether you would be better served by a settlement or consolidation program when we meet during your initial consultation. We want to find the right solution for you.
Resource material: “Surviving Debt: A Guide for the Consumer,” National Consumer Law Center 3rd Ed. 1999