Introduction: Everyone knows someone who has filed a bankruptcy, whether it is your neighbor, a family member or that well recognized person in the news! This leads to many “horror stories” about bankruptcy. However many of these horror stories are not accurate and there are many Bankruptcy Myths floating around. In the next 2 articles we will discuss the TOP TEN BANKRUPTCY MYTHS, and the Facts that everyone should know.
Top Ten Bankruptcy Myths-Part 1
Myth 1-I will lose everything if I file Bankruptcy, including my house and my car.
Fact-If you are current on your mortgage payments (or car
payments) and do not have too much equity in the items you will NOT lose them. Bankruptcy laws vary from state to state, the majority of debtors in Idaho are able to exempt their homes, their cars, all of their household goods, as well as retirement accounts and many other items. Even individuals who are not current or have equity may be able to save their home or car in a chapter 13.
If the items have a secured debt, such as a home mortgage or a car loan then you will have to pay those loans to keep the items. There are some options through a chapter 13 that may reduce the amount that has to be paid on the secured items.
Myth 2-Filing bankruptcy is really hard and I probably won’t qualify.
Fact-It is not hard to qualify for bankruptcy; there are different types of bankruptcy that offer relief for almost everyone. In most cases it is not “hard” to qualify nor is it hard to file. However there are a lot of small nuances in filing bankruptcy, such as courses that need to be taken and specific items needing to be disclosed in a specific manner. With the help of our office we can make the process simple and smooth and ensure that you don’t encounter unnecessary stress or complications.
Myth 3-All debts are wiped out in a bankruptcy Fact-Certain types of debt cannot be discharged in a bankruptcy. They include child support and alimony, criminal restitution, debts incurred by fraud, student loans and some taxes.
Additionally as far as secured debt, the personally guarantee is discharged but the underlying lien is still valid, this means to keep a home or car with a loan on it you will have to pay the debt.
There are hardship discharges for student loans but the requirements are very specific and most individuals don’t qualify for this type of relief.
Whether or not taxes are discharged in a bankruptcy is also very specific.
The ability to discharge certain types of debt should be discussed with a qualified attorney to make sure you are getting all of the relief you are entitled to.
Myth 4-I Can Only File Once for Bankruptcy Protection.
Fact-You can file a chapter 7 bankruptcy every 8 years. This doesn’t mean you should but in the event that you have filed in the past and have again found yourself with unmanageable debt, there is relief available.
The rules for other chapters are different and relief is available less than
8 years from a previous bankruptcy. Individual circumstances should be discussed with your attorney.
Myth 5-Even If You File for Bankruptcy, Creditors Will Still Harass You and Your Family
Fact-Upon the filing of your case the Bankruptcy Court issues an automatic stay, this is an order telling your creditors that they cannot harass you. In fact they are not allowed to call, send letters, file lawsuits or anything else. The Automatic Stay prohibits creditors from taking any collection action against, without first obtaining permission from the court. Relief from the Automatic Stay will only be granted to creditors who can show they are entitled to proceed, therefore only secured creditors and some priority creditors will be entitled to relief and only if they can show good cause to the court. If a creditor violates the automatic stay you may even be entitled to compensation from the creditor.
The #1 thing to take from this is that there are options! You should discuss all of your options with a qualified attorney who can advise you as to how the above items will affect you and whether bankruptcy is the right option for you. Stay tuned for Top Ten Bankruptcy Myths-Part 2, or contact our office today to schedule a no obligation consultation.