Top 10 Misconceptions Regarding Bankruptcy

If I Were To File For Bankruptcy, I Could Lose Everything I Own.

Rectification: There are two types of bankruptcies. In chapter 13, you're not at risk of losing anything because chapter 13 protects all of your personal assets, your home and your personal property, your furniture, your appliances, your automobiles. But what you're doing through chapter 13 bankruptcy is paying back to your creditors any equity that is there on those assets. It gets a little more involved than that, the bankruptcy laws do give you exemptions to exclude some of your equity but you wouldn't lose anything. The same is with chapter 7. The exemption laws do protect a lot of the equity that you have exposed but if you have a car that you don't owe any money on so it's all equity. Let's say it has a value of about $6,000, the bankruptcy laws do give you exemptions to protect up to $3,600 of that equity.

What the trustee would want from you instead of taking your car, he would want the amount of equity exposed. So, if your car is worth $6,000 and you have an exemption of $3600, then there's about $2,400 of equity there that trustee would want for you to pay over to him. Most of the trustees will take payments over time; they like to have it paid off within a year. So to keep your car, you'll have to make monthly payments at about $200 a month for 12 months. In the alternative, let's say if you don't want the car anymore, the trustee would take your car, sell it, pay you back your $3,600 exemption and then give the rest of the money he's realized on the sale to the creditors but you don't lose anything you don't want to lose in bankruptcy.

If I Were To File For Bankruptcy, I Can Go Ahead And Max Out My Credit Card Because I Won't Owe Any Debt.

Rectification: Prior to them changing the laws back on October 2005 that you could possibly get away with it but now, they have the new law that has set up a presumption period, meaning that if you take big cash advances of your credit card or if you've made major purchases or anything like that within 90 days of the filing of the bankruptcy, the creditor could object to the discharge of that portion of the debt that you owe. Let's say you have a credit card that you owe about $5,000 and you have a $5,000 balance on it. So, if you went and charged up that $5,000 within 90 days of the charging of it and filed bankruptcy, the creditor could object to the discharge of that amount of $5,000. You'd still owe the creditor any amount that you charged within that 90-day period. It's not a good idea to charge up your credit cards prior to the filing bankruptcy and if you do, you generally would have to wait past 90 days to file bankruptcy.

I Can Get Any Kind Of Lawyer To Handle My Bankruptcy Case.

Rectification: Most of the cases are fairly straightforward and fairly simple and you could do bankruptcy yourself. A debtor that files bankruptcy themselves are called Pro Se Debtors and yes, you can do it yourself but there are so many nuisances that you have to be careful of the bankruptcy law. You have to watch out for the exemptions and the presumption period. I always tell people that you would not hire a general practitioner to do brain surgery. You want to hire somebody that knows what they're doing, that knows the ins and outs of the bankruptcy laws and can help you make this process work very smoothly. I would never recommend anybody going to an attorney that is called a general practitioner. I think everybody has a specialization, the bankruptcy laws are vast and pretty hard to understand, so I'll make sure I would get somebody that does the bankruptcy law. If you want to get a divorce, I would get an attorney that does nothing but divorce or domestic law but if you're going to a general practitioner, there's no way that they could fully understand all the bankruptcy laws.

I Don't Know If I Can Qualify Bankruptcy Because I Think I Make Too Much Money.

Rectification: The income is one of the main factors we look at to determine what kind of bankruptcy you qualify for. When they changed laws back on October 2005, what they did was they established what they called median incomes owned in each geographical area based on household size. For example, the median income for husband and wife with two children is $70,000 a year. If your income is above $70,000 a year, then there's a presumption that you have to file what is called Chapter 13 Bankruptcy and pay back a portion of your debt. If your income is at or below the $70,000, then you would qualify for either chapter 7 or chapter 13. So, even though you make a lot of money, you still can file bankruptcy. It just depends on if you're above median income or below median income but having a high income does not mean that you cannot file bankruptcy. I do have clients that come in here and they're making $150,000 a year but they have $70,000 on credit card debt but they are able to file a chapter 13 bankruptcy and get rid of that credit card debt within 5 years.

If I File For Bankruptcy, I Can Never Have Good Credit, Which Means I Can Never Buy A Car Or A House On Credit

Rectification: Filing bankruptcy does not ever prevent you from purchasing anything on credit. You will recover after your bankruptcy is over. The national average, as far as recovery period when you file a bankruptcy is 2 to 3 years meaning that the bankruptcy should not affect you after 2 or 3 years. I have clients that have filed chapter 7 bankruptcy and within 2 to 3 years after the bankruptcy's done, they're buying new homes. As far as getting a car, after you get your discharge, I cannot think of a dealership that will not finance an automobile for you. Now, of course the interest rate you'll be paying on these items, on a home or a car, are not going to be the same as somebody with perfect credit but they are not going to be so outrageous that you're not able to afford it. You will recover, everybody does, it just takes time. As I tell my clients, you didn't get to this point overnight and you're not going to get out of it overnight but you will get out of it. So, you will recover and you will be able to finance cars and other things and even homes.

Bankruptcy Is An Extremely Long And Time-Consuming Process That It May Not Even Get Approved For

Rectification: Every individual that has a social security number can qualify for bankruptcy. It may not be a chapter 7, it may be a chapter 13 or maybe a chapter 11 but there is some bankruptcy or form of bankruptcy or some chapter that you will qualify for. Chapter 7 has income limitations, chapter 13 has asset limitations meaning that if your income is above the median, then you'll have to file a chapter 13 but if you owe over $1.3 million in secured debt, you cannot file a chapter 13 bankruptcy, you'd have to file an individual chapter 11. So, there is some form of bankruptcy that you will qualify for. What I recommend is talking to a professional bankruptcy attorney and finding out what your options are.

There Is A Separate Kind Of Bankruptcy For Medical Bills

Rectification: There is no particular bankruptcy just focused on the type of debt that you have. A chapter 7 would discharge you from medical bills or would discharge you from credit card debt or discharge you from repossessions or discharge you from foreclosures. There is not one single bankruptcy where the focus is primarily on a particular type of debt. Chapter 7 bankruptcy, chapter 13 bankruptcy or chapter 11 bankruptcy takes care of all your debt, credit cards, medical bills, repossessions and so forth. There is not one bankruptcy just for medical bills, it would be either chapter 7 or 13 or 11 depending once again on your income and your assets that determine what kind of bankruptcy you qualify for.

Everyone Will Find Out About My Bankruptcy And It Will Make Me Seem Irresponsible

Rectification: As far as your Chapter 7 bankruptcy filing being published in a newspaper or online, I am not aware of any publication like the local newspaper or magazine or anything like that that publishes the bankruptcy filing for the public to have access to. Even though it is public information when you file bankruptcy, an individual would have to go to the bankruptcy court to or have access to the online bankruptcy database to determine if you have a bankruptcy. So, it's not published anywhere and so even though it's public information and you can go to the courthouse and look it up or you have to have access to the court information online but you have to sign up for that and usually, that is only given to creditors and attorneys.

Chapter 13 is a little different. The chapter 13 trustee, in this jurisdiction, requires that your payments be made by payroll deduction, so your employee would get an order from the chapter 13 trustee to start withholding your chapter 13 payment out of your paycheck, it's kind of like a child support garnishment. That's the only problem that people have with chapter 13 is that because their employer will find out about it but generally in chapter 7, no one finds out about it except you and your creditors.

I Only Have One Chance To File For Bankruptcy

Rectification: It'll be nice if you only had to file for bankruptcy one time in your life. But I do have clients that have filed multiple bankruptcies. As far as chapter 7, the bankruptcy laws require that there is an 8-year time period between the filing date of chapter 7. As far as between the chapter 13 and chapter 7, there is a 4-year wait period between the filing date of chapter 13 and the chapter 7, and either a 2 to 4 year period between chapter 13 bankruptcies. So, you can file bankruptcy multiple times, it just depends on the chapter of the bankruptcy and the amount of time that's required between these chapter but you can file more than once.

If I Am Married, We Both Have To File For Bankruptcy

Rectification: A married couple does not have to file jointly for bankruptcy. If I owe the debt and you see this a lot when people who are married later in lives and they had incurred a lot of credit card debt prior to getting married and they're named alone. Their credit is bad and their spouse's credit is good, then that one individual with a lot of credit card can file without their spouse filing also. That does change whenever you start incurring joint debt because it's always best for both parties to file, both spouses to file if there's a lot of joint debt between the two of them.

As long as the debt is just on one spouse's name, that spouse alone can file bankruptcy. The only issue runs into is that if you're married, the bankruptcy laws require that it'll look at total household income vs. total household expenses to determine what kind of bankruptcy you qualify for. But if you are married, I do have to look at both incomes and sometimes that will throw you out of chapter 7 filing and it puts you into chapter 13 but both spouses don't have to file if they don't want to and an individual could file. That's totally their choice.