Many people have misconceptions about bankruptcy. Unfortunately sometimes, their wrong information causes them to not consider bankruptcy as a solution to their debt problems or to put off filing, which creates more problems for them.
Myth: Only deadbeats file bankruptcy.
Fact: Most of the people I see for a consultation want to pay their bills – they just need a payment plan that they can afford. The deadbeats are the ones that don’t want to pay their bills, and those people seldom come see me for help. The majority of people who file for bankruptcy are responsible individuals who end up in bankruptcy because of income loss, job loss, illness or divorce. In most instances, they do everything they can to avoid bankruptcy.
Myth: Everyone will know that I filed bankruptcy.
Fact: Although all bankruptcies are a matter of public record and available for anyone to review, people must know where those records are located and must be motivated enough to go to the courthouse and look at them. So, unless you are a very prominent person, it is likely that only your creditors will know about your bankruptcy.
Myth: If I file for bankruptcy, then my creditors as well as debt collectors will still harass me.
Fact: Creditors and debt collectors who continue to harass you after your bankruptcy has been filed with the bankruptcy court will be violating federal law because of something called the automatic stay. The automatic stay is a court injunction that prohibits them from contact you once your bankruptcy case begins. It’s one of the major benefits of filing bankruptcy. If any of your creditors or debt collectors contact you after your case has been filed with the bankruptcy court, simply provide the creditor or collector your case number, and then let your attorney know who contacted you.
Myth: It’s okay to charge up my credit cards just before I file for bankruptcy.
Fact: As a general rule, anything you do shortly before filing bankruptcy is looked at very carefully. You could be forced to repay any charges totally more than $700 that may have made during the 90 days prior to your filing. This same warning also applies to credit card cash advances and balance transfers that you have made in the 70 days prior to your filing. If this is going to be a problem in your case, then the easy solution here is to simply delay the filing of your case.
Myth: All of my debts will be wiped out if I file Chapter 7 bankruptcy.
Fact: Certain kinds of debts cannot be discharged in bankruptcy. They include most taxes, child support, spousal support, student loans, and any debts that you obtained as a result of fraud or misrepresentation. Additionally, a Chapter 7 bankruptcy will not get rid of your home loan or car loan if you want to keep the home and car. The general rule regarding home and car loans is this: if you want to keep them, then you have to keep paying for them.
Myth: I can transfer things I own to family or friends, and then file bankruptcy without any problem.
Fact: If you transfer any property that you own to someone else, by selling it or signing over the title to it to another individual just prior to the start of your bankruptcy, then the trustee in your bankruptcy may be able to void the transfer. The rule here is to keep it and protect it.
Myth: I don’t need to list all of my debts and all of my assets on my bankruptcy forms.
Fact: When you file for bankruptcy, you must put all your cards on the table face up. This means that you must tell your attorney about all of your assets and all of your debts so they can be listed on the Schedule of Assets and Schedule of Debts that the attorney will complete for you and file with the bankruptcy court. Not listing one of your assets or debts on these forms could have negative consequences for your bankruptcy. Namely, you could lose the asset, and you could end up stuck with the debt.
Myth: I’ll lose everything I own in bankruptcy.
Fact: This is a common misconception that keeps many people who really need bankruptcy from seeking help. Most of my clients do not lose any of their assets. In large part this is because in bankruptcy there are exemptions that apply to most of the things that people own. For example, there is a homestead exemption that protects you from losing your home in bankruptcy.
Myth: Bankruptcy will ruin my credit forever.
Fact: Your bankruptcy will show up on your credit report for up to 10 years; but as time passes, the fact that you filed will become increasingly less important to creditors, assuming that you do a good job of managing the new credit you get. Here’s why: After you file for bankruptcy, your credit score will be determined by comparing how you manage your credit after bankruptcy against other people who have filed for bankruptcy. This means that if you file for bankruptcy and manage your credit carefully, you will end up with a higher score after bankruptcy than the one you had before bankruptcy.
Here’s a couple of other things to keep in mind: If you are considering bankruptcy, then your credit records may already be damaged by late payments, collection accounts and the like, all of which will be reported for 7 years. The point here is that there’s not much difference between “bottom” and “rock bottom.” Also, once you get rid of your debt, your debt-to-income ratio should improve, which ought to make you more attractive to creditors than you were before you filed. Finally, in the world of credit, “Cash is King.” The problem that most of my clients have after bankruptcy is saving money for a downpayment and carving room out of their budget for a money payment. That’s an income problem, not a debt problem.
Myth: Since I am married, my spouse and I must both file for bankruptcy.
Fact: You and your spouse do not necessarily have to file bankruptcy together, but only the spouse who files and completes the bankruptcy gets bankruptcy protection. If all of the debts are in your name, then it may be fine if just you file. However, if the debt is in both of your names and just one spouse files, the other spouse will still be legally liable for the debts, which means that in the end, your bankruptcy will not have accomplished much of anything.
Contact Us to Discuss Debt Relief Options
If you are considering bankruptcy as an option for debt relief, then it is important to seek representation from a San Antonio bankruptcy attorney in your case who can help you to pursue the results that you need. With more than 14 years of experience, I can provide you with the legal representation and guidance that you require throughout this process. Seek my representation in your case today!
