Bankruptcy Myths
- Chapter 7 Bankruptcy is no longer available.
Truth: The great majority of people that would have qualified for a "straight" Chapter 7 bankruptcy before the changes to the Bankruptcy Code in 2005 still do so today. While the process has become a little more complicated, the major provisions have stayed the same. A consultation with an experienced bankruptcy attorney will quickly result in determining bankruptcy qualification.
- I will ruin my credit if I file for Bankruptcy.
Truth: Most people that need to file bankruptcy either already have bad credit or will begin to see a decline in the credit they have because they can no longer meet all their financial responsibilities. Their credit cards or lines of credit are usually "maxed-out" and they can no longer survive by paying their necessary living expenses and the minimum payments on their credit card. Filing for bankruptcy stops the bleeding. A bank is more likely to extend credit to someone who has filed for bankruptcy and is now debt free then to someone who has not filed but is overextended. Remember, your credit is your ability to borrow money, not your payment history.
- You have to pay back all of your bills in a Chapter 13.
Truth: What you pay back in a Chapter 13 plan of reorganization depends on many factors, including your disposable income, the value of your non-exempt property and the types of debts you have. You may pay back as little as nothing to general unsecured creditors like credit cards, medical bills and even auto and home loans if you wish to surrender them or as much as 100%.
- If I'm not employed I don't need to file bankruptcy.
Truth: If you are not employed and have no other source of income or assets then it may be true that you do not need to file for bankruptcy. However, filing will help you improve your bad credit. Further, if you don't file, but later start working, you might be collectable and your wages could be garnished. You should consult with an attorney to see when, or if, you need to file bankruptcy.
- You will lose your assets including personal belongings if you file for bankruptcy.
Truth: There is very little chance that a person will lose any assets when filing for bankruptcy. The law allows you to "exempt" certain property, including pensions, which are beyond the reach of the bankruptcy trustee and creditors. If there is any likelihood of losing property, your attorney should be able to inform you of that before a bankruptcy petition is filed.
