We constantly meet prospective clients who have the following misconceptions of bankruptcy:
I can’t keep my house and other property if I file for Bankruptcy
This is probably one of the biggest misconceptions about filing for bankruptcy. Clients seem to believe that they cannot file a Chapter 7 bankruptcy if they own a home. While different states have different allowances for property, less than 1% of people who file may have any issues regarding their real estate and less than 5% regarding other property. While there is a difference between chapter 7 and 13 bankruptcy in terms of exemptions, we will review all of your assets and determine if there is any likelihood of losing anything before we file.
My credit will be shot and I will never be able to finance anything again!
Okay, let’s start with the fact that yes, it is true, filing bankruptcy will not increase your credit score. While this subject credit rating is the most often asked question by my prospective clients, it is always the least relevant issue at hand. The large majority of prospective clients have a poor credit score before they file. While the filing of your case may drop your score, the practical reality is the average person realizes an increase in their credit score by approximately 100 points a year after the filing date. How could this be? Think of it this way. You have discharged your old debt. Thus delinquent payments are no longer reported on those accounts on your credit report. In terms of impact on your credit, there isn’t a major difference between chapter 7 and 13 bankruptcy. Also, most filers have a better chance of getting a loan after their bankruptcy discharge than before they ever filed because these institutions want to see a low income-to-debt ratio. In other words, because you owe little or nothing after you filed for bankruptcy, you have a better likelihood of being able to afford your new car loan.
My filing will be public knowledge.
While it is true that every bankruptcy filing in the United States is public record, unless you are a prominent person either in business or politics, your filing will not be picked up by the media. There are simply too many people who file for the local papers to list those that file.
It is difficult to file for bankruptcy.
While an attorney is recommended to file, it is not necessary. You can file for bankruptcy if you do enough research. Time and time again, however, individuals and couples who file without an attorney end up scrambling to correct their mistakes, lose their ability to receive a discharge, or lose property to the trustee. It can also be difficult to understand the difference between Chapter 7 and 13 bankruptcy and know which is appropriate for you to file. Contact us today to set up your free initial consultation!
I can pick and choose who to include on my bankruptcy.
Definitely not! The court requires that you list all of your creditors, whether or not you are current, or want to continue making payments to them. There is no difference between Chapter 7 and 13 Bankruptcy when it comes to this – you absolutely must list all of your creditors. This includes personal loans to people you know or doctors’ offices. This does not mean that you have to surrender your automobile because you listed your automobile loan on your bankruptcy. You can sign what is called a “reaffirmation agreement.” This way, it will be as though you never filed bankruptcy on that creditor.
I can discharge all my debts under Chapter 7 bankruptcy.
Unfortunately, this is not necessarily true. Certain debts, like most taxes, alimony or child support, government-issued or guaranteed student loans, debts incurred through fraud or embezzlement are among some types of debts that cannot be discharged in bankruptcy.
Married couples both need to file.
A married individual can file his or her own bankruptcy without the need for his or her spouse filing. For this requirement, there is no difference between Chapter 7 and 13 Bankruptcy – either type can be filed as an individual.
I can only file for bankruptcy once in my life.
While you can file more than once in your life, there are restrictions on how often you can file.
I can max out my credit card balances knowing I am filing bankruptcy.
This would be a clear case of bankruptcy fraud and would very likely result in your denial of receiving a discharge of those debts among other possible ramifications.
I can’t file for bankruptcy because of my minimum amount of debt.
Technically, there is no minimum to file for bankruptcy, however, you probably do not want to file if your debt level is very low. Of course, it is a case by case evaluation. Some clients make in a month what other clients need to discharge in the entire case. If there is no real likelihood that you will be able to meet all of your legal financial obligations, then bankruptcy is a good option to explore. Contact us today to set up your free initial consultation, and let our bankruptcy attorney help you understand the difference between chapter 7 and 13 bankruptcy and what options you have to get your finances back to a manageable level.