To many people, the very idea of filing for bankruptcy is terrifying. In fact, the only reason many of our clients find us is only because the fear of mounting debt and harassing creditors becomes even greater. While the prospect of facing bankruptcy can be scary at first, much of the fear is based on myths rather than reality. Here, we’ll debunk the most common of these untruths:
Myth #1: You need a certain amount of debt to qualify for bankruptcy.
The measure of debt for bankruptcy relief depends on your ability to repay the debt, not the amount. For some, a debt of $5,000 may be crushing - if you don’t have enough disposable income to pay it off in a reasonable amount of time, that could be enough to qualify.
Myth #2: You’ll lose everything you own.
This is one of the more insidious myths about bankruptcy, and prevents many people from filing. Laws differ throughout the country, but every state exempts (or protects) certain assets from seizure, including homes, cars, retirement funds, household goods, essential clothing and so much more. You get a fresh start, but you don’t have to start from scratch.
Myth #3: You’ll never get credit again.
In reality, many of our clients have credit card and auto finance offers appearing in their mailboxes even before their cases are finalized. After all, when your unsecured debt drops to zero, your debt-to-income ratio—one of the most important factors in lending—becomes much more attractive to potential lenders. In fact, it’s common for bankruptcy to actually improve a debtor’s credit score in as little as one year. And there are many options for rebuilding your credit after bankruptcy.
Myth #4: If you are married, both spouses have to file.
Filing for bankruptcy depends on who owes the debt, not marital status. If you and your spouse have joint obligations you want to discharge, you need to file together to prevent creditors from seeking repayment from the spouse. However, if only one of you signed for the debt, there is no reason you have to file together.
Myth #5: You can only file for bankruptcy once.
The new bankruptcy laws affect how much time must lapse between bankruptcy filings, but they do not eliminate the possibility of filing more than once. You must wait eight years between filing a Chapter 7 bankruptcy and filing a Chapter 7 again. For Chapter 13 bankruptcies, the waiting period is only two years from date of filings. This period changes if you file under different chapters each time. So if you have previously filed for bankruptcy and need to do so again, you should contact an experienced bankruptcy attorney to discuss your options and eligibility.
Myth #6: Everyone will know you filed for bankruptcy.
Bankruptcy filings are numerous, especially during these difficult economic times when many people are seeking a fresh start. While bankruptcy filings are a matter of public record, it’s unlikely to be reported by anyone, and even more unlikely that your friends and family make a habit of reviewing bankruptcy court records. In reality, it’s quite possible that the only people that will ever know you filed are your attorney, creditors, court officials and anyone you decide to tell.
In the unlikely event someone would find out, it’s important to remember that Bankruptcy is not something to be ashamed of - many good and hard working people file bankruptcy due to their circumstances.
Myth #7: Filing for bankruptcy is hard work
Trying to file by yourself certainly can be strenuously hard work - and risky. But an experienced bankruptcy attorney can lay out your options in plain English, help you navigate the process and obtain lasting relief without strife or hassle.
So What Now?
The decision to enter into bankruptcy should not be taken lightly, but remaining stuck in a cycle of debt can have a lasting impact on your financial situation, as well as your emotional and physical well-being. Bankruptcy laws exist to help consumers who, for one reason or another, have found themselves in a financial hole they cannot dig themselves out of. By speaking with an experienced bankruptcy attorney, you can find relief and hope. Lincoln Law is here to help liberate those with debts ranging from under $10,000 to well over $1,000,000.
So forget the rumors and get the facts. Your future hinges on it. Call us today to schedule an appointment and embark on the path to debt-free living.