Top Ten Bankruptcy Misconceptions

This is definitely not true. There are, in a word, when you file bankruptcy technically everything you own becomes part of the bankruptcy estate. It’s similar to when somebody dies all their property goes into an estate.

Your property goes into an estate and the trustee that’s assigned to your bankruptcy case has the power to distribute that estate according to the bankruptcy laws. The reason that you’re not going to lose everything that you own is because the bankruptcy code provides for exemptions from that estate, which means that you get to keep a lot of your property.

Depending on the State that you’re in or the Statute that applies, you’re going to get to keep a certain portion of proceeds from your house if it’s sold or you can keep the house altogether if it’s not worth more than the exemption amount. You can keep your cars up to a certain amount. You can keep clothing. You can keep household items, furniture, dishwashers, clothes washers, and all kinds of stuff like that. It’s provided for in the bankruptcy code for you, so that the trustee can’t take it and sell it. Then, in practicality, the trustee usually doesn’t bother to take things that you own and sell them unless they are worth enough money for the trustee to get a significant return on that item. Basically, what that means is that generally in Chapter 7 bankruptcies you’re not going to have to give up anything that you own. The only time that you would lose something is, if you have a particularly valuable asset that is very easy to sell and isn’t provided for in an exemption. It’s actually pretty uncommon for you to lose anything, let alone everything that you own.

In addition to that, if you’re filing Chapter 13 bankruptcy then you get to keep everything that you own. That’s part of the deal with the Chapter 13, so that’s definitely a misconception.

You have to be careful with things like this because the bankruptcy trustee is charged with administering your bankruptcy estate. They’re also charged with rooting out any types of bankruptcy fraud, so any instances of fraud can get reported and you can end up with a criminal investigation, which is something that nobody wants, obviously.

When you’re filing bankruptcy if you take on additional debt right before you file bankruptcy in a way that’s fraudulent it’s definitely against the law. You don’t want to go and max out your credit card and then turn around file bankruptcy unless there is a reason for it or you’ve discussed it with an attorney or it’s something that you did before you were contemplating filing bankruptcy. The bottom line is if you’re doing something fraudulent, then that’s illegal and you can definitely get in trouble for it.

This is almost true. Bankruptcy is a Federal law and it goes through the Federal court system. Any lawyer that is admitted to the Federal Court in your area where you’re looking to file can technically represent you in a bankruptcy. However, that doesn’t mean that it’s a good idea for a lawyer that doesn’t do bankruptcy to file your bankruptcy for you.

A bankruptcy is one of the most technically different and diverse fields of law. There’s a lot of knowledge that you need that’s specific to bankruptcy. It’s unlike any other kind of law where maybe you have trials and things like that, or if it’s a transactional law where somebody fills out wills or does divorces or custody, all that kind of stuff.

It really doesn’t have very much to do with the bankruptcy code. That is a whole different lexicon of terms and rules and different procedures dealing with the trustee and the bankruptcy courts. Really what you need is you need an attorney that understands the bankruptcy code and the procedures and knows the trustee’s offices and all the unwritten rules for getting things done. Understands what bankruptcy is and what potential problems could come up in your case, so that they can see them ahead of time and know the river, so to speak before you go down it in a raft.

Technically true, you can get any attorney that’s admitted into the Federal Courts to represent you in a bankruptcy. It’s usually not a good idea to have anybody other than somebody who practices bankruptcy regularly represents you in your bankruptcy.

This is a myth because it is almost never true. No matter how much money you make there is some kind of bankruptcy that you can file. Even if you make quite a bit of money most people are not making enough money to where they can file the normal kinds of Chapter 13 bankruptcies.

As far as Chapter 7 goes, it’s more common to have somebody make too much money to file for a Chapter 7 bankruptcy. The way that works is there’s a means test that you have to pass to file a Chapter 7 bankruptcy. To just summarize, if you make more than the median income in your state for your household size, then you may not be able to file Chapter 7 bankruptcy. There are circumstances where you can still file Chapter 7. Even if you can’t file Chapter 7 you can almost always file Chapter 13, because the income requirements are so high they really don’t apply to very many people. It’s usually not a concern how much money you make. The concern is how much that you have and whether you’re able to pay your bills. We can usually help you file some kind of bankruptcy the matter what your situation is.

This is not true. First of all, when people come to see me to file bankruptcy usually the situation is their credit is already pretty bad. It’s unfortunate, but it’s true. Most people that are filing bankruptcy have already been having trouble struggling with that for some time. Their credit has been destroyed as a result of that.

The piece of truth that is in this myth is that when you file bankruptcy. It will stay on your credit report for 10 years. It will negatively affect your credit report. However, the truth is, it’s better to file bankruptcy, take care of those debts now and then slowly rebuild your credit over that period of time while the bankruptcies on there. You will build your credit score back up faster than if you were trying to struggle and continue to have late payments and big debts that are hanging out there on your bankruptcy.

It’s not uncommon for some bodies bankruptcy score to go up shortly after the file bankruptcy. It still won’t be particularly high, but it is something that can be improved over time if you after you file bankruptcy you manage your debt in a responsible way and you build your credit score up.

Then, let’s see, the other part of this that’s untrue is that a lot of times when you file bankruptcy right away you’ll get offers for credit cards and car payments in particular. The reason for this is that the credit card companies and the car companies they know that you can file bankruptcy again for period of time. You’re less of a risk to file bankruptcy, so they’re willing to extend some credit for you.

This can actually be a win-win situation. If you’re careful with it you can take those credit offers and you can get a little bit of credit to start off with right after you file your bankruptcy. They can help you build your credit backup if you do it in a responsible way. Of course, you don’t want to go overextending yourself and getting yourself back in the same trouble that you’re having right now before you filed bankruptcy. It’s definitely not true that bankruptcy is for ever going to ruin your credit.

Depending on the kind of bankruptcy that you enter, it can be a long process. The active part of that process all happens right up front. For instance, if you’re doing Chapter 13 bankruptcy and you’re entering a payment plan. It could be a number of years that you’re making payments. As far as me filling out the petition, doing the required court activities and meeting with trustees and creditors all of that stuff is going to happen within the first couple of months. After that’s over, you are pretty much done other than just sending your check into the trustee monthly. It’s a long process, but it’s not particularly stressful or time-consuming. You’re not going to be having to go to court for years and years on end. If you do a Chapter 7 bankruptcy, the process is even faster because you’re going to get a discharge almost immediately, within a few months after you file.

It’s the same basic process in the beginning. We have to get together and fill out your petition. Then, you’ll have a meeting with the trustee, but after that, you’re done. That can happen within a month after you meet with me for the first time. It’s definitely not a long and time-consuming process. You’re not going to have to go to court all the time. You’re not going to be dragging things out for years, unless there’s some special circumstance with your case, which is really rare. Then, as far as getting approved for it, really, you don’t need to be approved to file bankruptcy. As long as you meet the requirements of the bankruptcy code, you can file bankruptcy. There’s not any kind of approval process at all. It’s a right that you have under the United States Code, and even the United States Constitution.

Yeah, this is totally false. Medical bills are covered by just your regular bankruptcy. There’s no separate bankruptcy for any kind of bills or any kind of debts, especially not medical bills.

As a matter of fact, medical bills are one of the things that causes people to go into bankruptcy, most frequently. Many of the clients that I have are pushed to having to file bankruptcy because of huge medical bills and they are definitely dischargeable. There’s no separate process or anything that needs to be undergone to take care of those.

Yeah, like a lot of these myths there is a small nugget of truth in this myth. Part of the truth is that the bankruptcy filings are public information in the sense that if someone were to search for your name then they would find out that you filed bankruptcy. That’s about all they can find out and they would have to actively search your name in the bankruptcy courts to find that.

It’s not going to be published in the paper. You’re not going to have a mug shot or anything like that. Nobody’s going to get a notice of your bankruptcy except the people that you owe money to. It’s pretty much a myth. Lots of people are worried about the stigma of filing bankruptcy, but you would be surprised how many people you probably know, have actually file bankruptcy. You don’t know about it because people don’t talk about that kind of thing because it can be embarrassing. Definitely rest assured that nobody’s going to find out about you filing bankruptcy unless they, for some reason, want to search a specifically your name to figure out whether you have or not.

This is definitely not true. You can file for bankruptcy; Chapter 7, you can file every eight years. If you file once and then you find yourself in dire straits again in the future if it’s more than eight years you can file again for Chapter 7 bankruptcy. You can file more often for Chapter 13 bankruptcy. You have more than one bite at the apple.

It is important though, that you do your bankruptcy filings the right way and that’s why you need an attorney. If you make a mistake on your petition, you leave creditors out or you report something in the wrong way, then that particular debt or debtors or your debt to that debtor may be not dischargeable or something like that. You definitely want to make sure that each time you file you do it the right way with an attorney. You can do it more often than just once in your life.

You do not have to file for bankruptcy if you are married. You can file separately. You can have one spouse file and the other not file or you can file jointly. It’s almost like your taxes. You have options.

Most of the time if you’re both going to file it’s better to file jointly. If you just have one spouse that has debts they can’t be paid back then you can definitely just have that one spouse file and the other one not file. Sometimes that can help you with credit and things like that in the future. That’s definitely an option.

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