Bankruptcy Myths Debunked
Myth 1: Bankruptcy will no longer discharge my credit cards or medical bills.
NOT TRUE. The new bankruptcy law still allows for the discharge of credit cards, medical bills, and almost all other unsecured debt. Most people who wish to file a Chapter 7 total discharge bankruptcy still qualify, although people who earn a lot of money may be required to pay back some or all of their debt.
Myth 2: If I file for bankruptcy, the trustee will take away my house and car.
NOT TRUE. The vast majority of Chapter 7 filings are “no-asset” cases, meaning that there are no non-exempt assets for distribution to creditors.
Under new Ohio laws, even in a Chapter 7 bankruptcy, you can protect $136,925.00 worth of equity in your home [or $273,850.00 if two owners live in the home] and potentially $3,775.00 worth of equity in your car. The new laws also help you to protect other assets, such as cash and tools that you use for work. These laws make it much easier to protect your belongings from your creditors in a Chapter 7 bankruptcy, and the vast majority of filers are able to protect everything that they own.
However, even if your house or car is worth much more than the liens against it, there may still be bankruptcy options to help you obtain a discharge of debt with minimal payment to your creditors. We offer completely free consultations in order to help you evaluate all of your options.
Myth 3: I won’t be able to get new credit for 10 years.
NOT TRUE. People who file Chapter 7 bankruptcies are inundated with credit card offers and offers to purchase automobiles immediately after filing their case, and Chapter 13 filers often borrow money during their case.
By making good choices it is possible to steadily improve your credit rating after a bankruptcy. For some people, their credit situation is already so bad, that a bankruptcy improves their situation much more quickly. In fact, we have had clients report to us that their lenders advised them to file bankruptcy before applying for a house or car loan because their situation was so bad.
Myth 4: A bankruptcy cannot help me with income tax liability.
NOT TRUE. Some income tax liability is actually dischargeable, particularly tax liability that is over three years old!
And even in cases where taxes are not dischargeable, a Chapter 13 bankruptcy can help you to repay past due taxes while preventing the accrual of fines and penalties, and limit interest. Many people don’t realize that if you are sending small payments to the IRS each month in satisfaction of an income tax debt, that the IRS continues to add on interest, fines, and penalties, which may make it virtually impossible to ever completely, satisfy the tax debt.
Myth 5: Only low-income individuals can petition for Bankruptcy Relief.
Although there are income guidelines in the new Bankruptcy law that determine what kind of relief you are entitled to, almost anyone can obtain protection from their creditors. People of all income levels and stages of life can find themselves in financial distress, even those with good jobs. Don’t assume that you don’t have any rights under the Bankruptcy law. Let an experienced attorney advise what options are available to you.
Myth 6: If I file a Chapter 13 bankruptcy, I must pay back all of my debt.
NOT TRUE. In a Chapter 13 bankruptcy, some percentage of debt is repaid to unsecured creditors, such as credit cards and medical bills. The percentage of debt that is paid back can range from 0% to 100% and is determined primarily by how much you can afford to pay and the value of any non-exempt assets.
In some cases, a Chapter 13 bankruptcy can even reduce the principal balance on your car loan, or lower your car loan interest rate.
Myth 7: If I have already filed a Chapter 7 bankruptcy, there is no way a bankruptcy lawyer can help me again until eight years has passed.
NOT TRUE. Even if you are not yet eligible for another Chapter 7 discharge, you may be eligible for a discharge in a Chapter 13 filing. And you may file a 100% Chapter 13 bankruptcy at any time, which may help you pay off the remaining debt over a period of years without the accumulations of fines, late fees, and high interest.
Myth 8: It isn’t that important to find an experienced bankruptcy attorney. Anyone can help me file a bankruptcy, or I can do it myself.
NOT TRUE. It is imperative that your attorney is knowledgeable in all facets of both Chapter 7 and 13 bankruptcy law. Even if you are only interested in filing a Chapter 7 bankruptcy, your attorney must have a thorough understanding of Chapter 13 provisions in order to help you determine if that choice is best for you.
For example, without the assistance of an experienced attorney, you could risk losing assets, put friends and family members at risk of being forced to return payments you have made to them, or your case could be dismissed for failure to follow all required bankruptcy procedures. Before consulting an attorney, make sure that he or she has ample experience practicing under the new bankruptcy law and is knowledgeable about the new State of Ohio property exemptions.
Myth 9: Married couples must file for bankruptcy together.
NOT TRUE. You can file together, or separately, as you choose. However, in many cases, it makes more sense for both spouses to file, since any joint debts that are discharged in one spouse’s bankruptcy filing can still be collected from the second spouse. Discuss these issues with your experienced bankruptcy attorney.
Myth 10: Creditors can still harass you if you file for bankruptcy.
NOT TRUE. Once your bankruptcy is filed, your creditors are subject to serious fines and penalties if they attempt to call you, send you a bill, file suit against you, or otherwise attempt to collect money from you. Under different federal debt collection laws, it is also possible to prevent phone calls prior to the filing of a bankruptcy. Call our office at 614/267-2871 to learn how.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
2500 N. High Street, Suite 100, Columbus Ohio 43202
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