If you are struggling with debt, you may be concerned about filing bankruptcy. You may have heard several negative things about the bankruptcy process, some of which may be untrue. At Andersen, Ellis & Shephard (formerly David Andersen & Associates, P.C.), we can help you separate the bankruptcy facts from myths so you can make an informed decision about your next step.
Creditors Can Take Your House and Car
This is sometimes true but not usually. Filing chapter 7 is often a good option and you can either keep the home and car and continue paying the home and car loan or surrender and cancel the debt on these items. Filing a Chapter 13 bankruptcy stops all foreclosure and repossession actions. During the bankruptcy process, debt is reorganized into a repayment plan, often allowing debtors to pay back past due mortgages or loan payments and keep their house and car by paying over time. However, some debtors may choose to surrender their house and car to relieve these debts and start anew. When you have questions, such as “Will I lose my house?”, a bankruptcy attorney can help determine which option is best for you.
You Can Lose Your Job
You Can Never Borrow Money Again
Although bankruptcy sometimes reduces credit scores and stays on your public creditor report for up to 10 years, many lenders will finance you at a higher interest rate shortly after filing bankruptcy. In fact, it is common to get home loans two or three years after filing. In many situations, your credit score may be better in the long run because much of the unpaid debt will be discharged and no longer being calculated in your debt-to-income ratio. Therefore, filing bankruptcy may be the only way to improve credit in the long run!
You Can’t Have Retirement Savings
Although you are limited in the value of assets you can keep through bankruptcy, the amount of money you can protect in your retirement fund is very generous. You do not need to liquidate your 401K to pay your creditors and it’s unwise to do so. Congress wrote the bankruptcy laws with protection of retirement in mind because bankruptcy is about receiving a fresh start not robbing your retirement. If you are considering taking money out of your 401K to cover your debt, please contact our office before doing so we can advise you of your options.
You Will Be Denied Government Benefits
The federal bankruptcy law provides protection against the denial of civil rights and government benefits for filing bankruptcy. This includes the right to borrow student loans, right to vote, right to government grants, right to hold permits and professional licenses, right to obtain Social Security and the right to unemployment benefits, among others.
You Can’t File Bankruptcy if You’re Employed
False. A Chapter 13 bankruptcy is ideal for people who are employed or have a steady income, but have simply fallen behind on payments. In fact, the reorganization plan is based on an individual’s ability to pay, and is adjusted according to the amount of income coming in each month. Many people with jobs may also qualify for chapter 7 if they do not make enough money to pay back any portion of the debt.
You Can’t File Bankruptcy on Credit Card Debt or Medical Bills
Bankruptcy is a federal procedure designed to help individuals rid themselves of debt and get a fresh start. Depending on the type of bankruptcy, a debtor can either reduce payments and consolidate debt (Chapter 13), or discharge and cancel debt without any payments (Chapter 7). If a debtor files a Chapter 7 bankruptcy, most debts are discharged, including credit card debt, medical bills and other unsecured debts. Some debts are not discharged in bankruptcy, including most taxes, student loans, support or divorce obligations, crimes or fraud.
Bankruptcy Can Be Denied
Due to the bankruptcy law changes in 2005, many people believe they no longer qualify for bankruptcy filing. In reality, 99 percent of the people who file bankruptcy with an experienced attorney achieve their debt relief goals. Less than 1% of cases filed using a competent attorney receive any kind of challenge to the right to file bankruptcy and these challenges are usually based on a high income or suspicious circumstances that involve concealment of assets or commitment of fraud or crimes. Even if a case is challenged, a well prepared case may succeed and result in the debt relief that the client needs.
Bankruptcy Is Your Fault
Bankruptcy is not usually the result of poor life choices or bad financial decisions. It is often due to circumstances beyond your control, such as loss of job, medical expenses, family breakups, separation, divorce, an illness or the economy. You should not feel ashamed, but rather look forward to the opportunity to move forward. Learn the facts about bankruptcy by contacting us today.
At the law offices of Andersen, Ellis & Shephard, we have represented thousands of individuals in consumer bankruptcy filings.