Bankruptcy Myths | Top 10 BK Legends Busted
Bankruptcy myths are things we think we know are true, but aren’t. 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 bankruptcy myths that are circulating regarding what these things are, or are not:
10. Everyone will know about it – First, 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 be able rent or get another job again – Next, this factor alone rarely will disqualify you from a job. Also, credit certainly is something that landlords and property managers care about. They want to know that you will be able to pay the rent. A bankruptcy is not an automatic blackball. Other factors play into their decision to rent to you.
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. Also, many companies will approach 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 there is credit after bankruptcy.
7. I’m keeping up on my credit cards so filing BK 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 – Huge misconception and bankruptcy myth. Stay current on your car payments. The finance company wants you to keep your 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 or a bit extravagant. This is related to the You’ll lose your personal belongings myth – in most cases, you will not lose your stuff. It’s difficult to get a fresh start if you had no clothes, shoes or bed.
5. Someone who has a job can’t file a bankruptcy – Most people I’ve met with and represented actually do have a job. There is no requirement that you 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 (or home equity), so I can’t file – 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. In truth, especially after January 2021, there are now generous homestead exemptions that protect a lot of home equity. And there are other exemptions that can protect cash assets.
This is similar to the “I make too much to file bankruptcy” myth. You may make too much for a Chapter 7. However, there are other bankruptcy 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. Since many people don’t save for these rainy days, the credit card debt can rack up. 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. A bankruptcy will prevent me from getting a mortgage – Actually, a bankruptcy could actually help you get into the home of your dreams. Without the debt, you will have an easier time qualifying for a home loan, usually two years after the discharge of debt is obtained. A LendingTree study shows this.
1. A bankruptcy is just forms, so do I need a lawyer? If you had a serious medical problem, you’d seek out a qualified doctor for your specific problem. Debt is a serious legal problem. Why risk a nonattorney petition preparer? You want an attorney who specializes in this field of law. 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.
Author: Hale Andrew Antico
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