Dispelling Bankruptcy Myths
- Jan 2016
- Hale Andrew Antico, Esq.
- 0 Comments
We all have these notions about what bankruptcy is. Some are true; others are scare tactics and fairy tales put out by those who have a vested interest in having you avoid a BK.
Here then is a list of the Top 10 myths that are circulating regarding what bankruptcy is or is not:
10. Everyone will know about it
While it is true that a bankruptcy filing is public record, the truth is that your friends, employer, family and neighbors will not bother to take the time to look it up. When was the last time you looked up anyone's bankruptcy? It's more likely that some of your relatives or friends have filed and you don't know about it.
9. You will not rent or get another job again
Future employers and landlords can ask about your credit history, but this factor alone rarely will disqualify you from a job. Also, you can't blame property managers for wanting to run a background check on you so they're assured you can pay your rent on time. But, a bankruptcy is not an automatic blackball. Other factors play into their decision to rent to you, and you'll probably want to first establish credit after bankruptcy.
8. I'll ruin my credit and never get credit again
Huge myth. Yes, a bankruptcy will impact your credit score short-term. It is far more likely that the high interest rate offers to rebuild your credit will start right after the bankruptcy... maybe even during it. Many companies will target the post-bankruptcy borrower just for this reason. Attorney Antico's advice: Just say no to these offers. You can get by without credit cards. But yes, there is credit after bankruptcy.
7. I'm current on my credit cards so filing bankruptcy is not for me
It is possible to file bankruptcy even if you are current on your credit card debt, bills and other debts. Paying minimum payments forever is not going to solve your debt problem.
6. You can't keep your car in bankruptcy
If you are current on your car payments, the finance company will be delighted to have you keep the car. If you stop paying, you don't get the car for free. Pay for it, you can drive it. Just like without the bankruptcy. There are tricky exceptions to all this, but they involve cars that are paid off, recently purchased ones or those that are extravagant. This is related to the "You'll lose your personal belongings myth" -- in most cases, you will not lose your stuff. Because it'd be tough to get a fresh start if you had no clothes, shoes or bed.
5. Someone with a job can't file bankruptcy
Most people I've helped actually do have a job. There is no requirement that a debtor be unemployed. And there is no reason your current employer would need to know about your filing bankruptcy, unless you are doing it to stop a wage garnishment. It is against federal law to discriminate against someone who has filed bankruptcy.
4. I have some money in the bank so I don't qualify
There is no requirement that you be destitute or insolvent to file a bankruptcy. For a Chapter 7, you merely must be unable to pay your debts, as determined by the means test. You may make too much for a Chapter 7, but there are other BK options that will allow you to get out of debt by paying what you can afford, on your terms, and while being protected from creditor lawsuits.
3. Only irresponsible people file bankruptcy
Sometimes bad things happen to good people. While no one aspires to grow up and file bankruptcy, life happens. Almost all of my clients have had an unexpected life change for which they were unprepared: a divorce, a job loss, a car accident, etc. Rainy day savings don't last, so the credit card help out in need. But now there is a debt problem, and that debt problems require debt solutions. A bankruptcy, while not the only debt solution, is one that should be considered if you want a fresh start. You are a good person. You deserve a fresh start. That's why these laws are here to protect you and help you.
2. Declaring bankruptcy will stop me from getting a mortgage
Actually, a bankruptcy could actually help you get into the home of your dreams, by putting your derogatory massive debts in discharged status. Without the debt, after you re-establish your credit after bankruptcy, you could have an easier time qualifying for a home loan, usually two years after the discharge of debt is obtained and you have a good post-discharge credit history.
1. I don't need a lawyer; bankruptcy is just forms, right?
Have you seen these forms? After the December 2015 changes, a bankruptcy petition can be over 75 pages long. And even the most basic question can be tricky: How do you value your clothes: what you paid for them, replacement value, yard sale value, etc. And that's something that seems simple. For some real fun, spend a few hours with the means test.
If you had a serious medical problem, you'd seek out a qualified doctor for your specific problem. Debt is a serious legal problem. You want an professional who specializes in this field. The forms can be complicated and confusing, with many decisions to make that could impact the success of the legal procedure or whether you will lose your assets or car. Don't cut corners or take a risk on a once-in-a-lifetime legal process where the results could haunt you for years to come. Have peace of mind knowing a skilled, experienced professional is on the job.