Top 10 Myths About Bankruptcy
Bankruptcy myths can be confusing and provide inaccurate information on how a bankruptcy proceeding can positively change an individual's financial situation. When truth is separated from fiction, you will quickly become aware of the many benefits that bankruptcy has to offer.
| Bankruptcy Myth #1: | There is no more bankruptcy and no more help under the new bankruptcy law. |
| Bankruptcy Myth #2: | If you file for bankruptcy, it will be made public and everyone will know. |
| Bankruptcy Myth #3: | An applicant has no recourse if denied. |
| Bankruptcy Myth #4: | Any type of debt can be discharged. |
| Bankruptcy Myth #5: | A creditor can continue collecting on debts during a proceeding. |
| Bankruptcy Myth #6: | A disability or job loss will not affect the bankruptcy. |
| Bankruptcy Myth #7: | The debtor will lose all possessions in a bankruptcy. |
| Bankruptcy Myth #8: | You will lose everything you own. |
| Bankruptcy Myth #9: | Your credit will be ruined for 10 years. |
| Bankruptcy Myth #10: |
You can choose which debts and property to list in your bankruptcy. |
- Myth #1: There is no more bankruptcy and no more help under the new bankruptcy law. FALSE. The truth about the new bankruptcy law, is that you can do almost everything as you did under the old law. In reality, the new law has increased some of the benefits of filing for bankruptcy. Many people who file for bankruptcy are getting a better break under the new law than they would have under the old law. To find out how, contact Ruben today!
- Myth #2: If you file for bankruptcy, it will be made public and everyone will know. FALSE. Just because you file for bankruptcy, does not mean it is going to be made public. Filing for bankruptcy is a matter of public record, however it will not be put on display for all to see and some may never know you file for bankruptcy unless they are specifically trying to track down information on you. In most cases, newspapers do not display information about bankruptcy filings unless it's at a corporate level. If they do, many people will not be concerned with who has filed for bankruptcy. In most cases, it will remain a private matter.
- Myth #3: An applicant has no recourse if denied. FALSE. A Means Test is performed in order to verify an applicant's ability to repay their debts. If the applicant's income exceeds expenses, the court may convert the Chapter 7 application to a Chapter 13 repayment plan, if it will not create an undue hardship.
- Myth #4: Any type of debt can be discharged. FALSE. While many types of debt can be discharged in a bankruptcy, it would be against public policy to allow the discharge of child support, alimony and certain types of taxes. Student loans are also considered a "non-dischargeable" debt, which means that it still must be paid by you after bankruptcy. However, there is one exception which is under the "undue hardship" exception. This means student loans can be discharged or eliminated in bankruptcy if the loan payments extremely burden you or your family.
- Myth #5: A creditor can continue collecting on debts during a proceeding. FALSE. An automatic stay is put into place by the bankruptcy court in order to cease the collection efforts of debts that are made a part of the bankruptcy application.
- Myth #6: A disability or job loss will not affect the bankruptcy. FALSE. A Chapter 13 bankruptcy allows for the repayment of debts over a 3 to 5 year term. If the bankruptcy applicant suffers a major disability or a genuine job loss, the court may choose to readjust the repayment period or discharge the remaining debts.
- Myth #7: The debtor will lose all possessions in a bankruptcy. FALSE. Laws can vary from state to state, however the majority of jurisdictions allow a bankruptcy applicant to keep certain types of possessions out of a bankruptcy proceeding. For instance, you may be able to keep a car, clothing and main residence.
- Myth #8: You will lose everything you own. FALSE. Just because you file for bankruptcy does not mean that you will lose everything you own. Bankruptcy laws vary from state to state, however every state has exemptions that will protect particular properties owned. Some of those properties owned may include your car, house, furnishings, retirement plans, household goods and more. However bankruptcy does not get rid of your mortgage or any liens over your properties owned. By making your monthly payments towards your debt, you will be able to keep everything you own.
- Myth #9: Your credit will be ruined for 10 years. FALSE. Bankruptcy is reported on your credit report, however it doesn't necessarily mean that it will have a negative effect on your credit. Truthfully if you have to file for bankruptcy, there is probably already an issue with your credit. Even years after you've filed for bankruptcy, if you re-establish good credit, the fact that you have a bankruptcy filing on your record will not have a negative effect on your credit.
- Myth #10: You can choose which debts and property to list in your bankruptcy. FALSE. Unfortunately you cannot do so because it is against the law. You must list all of your debts when you file for bankruptcy. Some people want to leave out certain debts because they want to continue paying it. On the plus side of having to list all of your debts, you can continue to pay them once you've filed for bankruptcy. There are some debts that you must keep paying on if you want to keep that particular property. If you stay current on your loan payments, you are protected under the law and you get to keep the property.
WE ARE A DEBT RELIEF AGENCY. WE HELP PEOPLE FILE FOR BANKRUPTCY RELIEF UNDER THE U.S. BANKRUPTCY CODE. The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.
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Ruben Fernandez
P.O. Box 391
Durham, NC 27701
Phone: (919) 451-1091