For many people, bankruptcy remains a largely misunderstood topic. Until they are forced to file, many people have never encountered bankruptcy law and they are therefore largely unaware of the many nuances that surround it. This can lead to significant confusion regarding the process, which can not only slow people up, but can also keep people from filing at all. To help clear up any confusion that may be had, Rowdy Williams Law Firm has prepared the following list of common bankruptcy myths, as well as the corresponding truth. By providing you with the facts, their Terre Haute bankruptcy attorney hopes to give you the tools that you need to proceed.
Misunderstandings About Bankruptcy
Myth #1: Bankruptcy Will Take Away Every Single Thing That I Own.
One of the primary reasons that many people shy away from filing bankruptcy is because they are afraid that if they file, they will lose all of their possessions. There is a mental image attributed to bankruptcy that everyone who files has to start over with nothing but the shirt on their back. This is completely untrue. The truth is that bankruptcy exemption laws make it where should you file you will be able to protect your most valuable assets. While Chapter 7 may cause some of your assets to be liquidated to repay creditors, it will almost certainly not be everything that you own. Most people find that they can keep all their assets. However, our Firm would have to review your assets to make the final determination of the same.
Myth #2: I Can Use Bankruptcy as Often as I Want.
Some people will fall into the line of thinking where they begin to believe that bankruptcy is an indefinite tool that can be used as often as they want – whenever they find themselves struggling with debt. This, however, is not true. There are specific limits about how often bankruptcy can be filed, depending on the chapter you are looking to file and the chapter that you previously filed. Regardless, you must always wait a few years between filings. Besides, it is a good idea to stay away from utilizing bankruptcy as a crutch instead of adapting financially savvy habits.
Myth #3: My Credit Is Going to Be Ruined Forever After I File.
Another common misconception about bankruptcy is that after filing, the consumer’s credit will always be destroyed. This is completely untrue. While bankruptcy will be a negative mark on the credit report for a few years, it is hardly permanent. In fact, many people find that after the file, they will almost immediately begin receiving offers for new credit. It is recommended that these people make wise decisions and limit themselves from overextending themselves, but with conservative choices, they can begin rebuilding their credit to put themselves on the path for long-term success.
Myth #4: Filing for Bankruptcy While Employed Will Put My Job in Jeopardy.
Many people mistakenly believe that if they file for bankruptcy, it will give their employer just cause to let them go or fire them. This is completely untrue. In fact, firing someone based solely on bankruptcy is considered discrimination and is illegal under U.S. employment laws. While there are certain professions that may create difficulty, it is against the law to fire someone based on a bankruptcy filing. It is also against the law to refuse to hire backed on bankruptcy.
Myth #5: If My Spouse Is Filing for Bankruptcy, I Will Be Forced to File as Well.
This is another persistent myth – many married couples thinking that they are required by law to file jointly. Again, this is untrue. The fact is that spouses are fully capable under the law to file separately should they choose. With this being said, it is recommended for spouses to discuss the situation together to determine what is right for them. While the filer may experience an automatic stay after filing, the spouse who did not file is still able to be contacted by collectors. It is therefore something that each couple should discuss with each other to determine what is the right decision.
Myth #6: If I File for Chapter 13, I Will Still Have to Pay Off Every Single Debt in Full.
While Chapter 13 requires you to pay off your debts, many debtors find that they end up paying significantly less than they truly owe. When structuring a repayment plan, it can help to reduce interest and in some cases, the debt may be paid off only partially to satisfy the debt owed to the creditor. This will depend largely on the type of debt you owe (priority debts, such as alimony and child support, will always need to be paid in full), as well as other relevant circumstances you find yourself facing.
Myth #7: All of My Debts Will Be Discharged if I File for Chapter 7.
Filing for Chapter 7 will allow for a large portion of your debts to be discharged, but this does not mean that all of them will be. There are certain debts that, regardless of the chapter that you file, will not be open to a discharge. These are known as secured debts and you will be legally required to pay them. One of the most well-known examples of a secured debt is money you owe towards child support or alimony. This is a secured debt and unlike unsecured debt (such as credit card debt), will not be able to be discharged.
Myth #8: If I Know I Am Going to Be Filing for Bankruptcy, I Should Pay Off Friends and Family.
This is actually a huge trap that debtors will fall into. Knowing that they are going to file for bankruptcy, many debtors will use their last dime to pay off debts owed to their loved one. This, however, is illegal as debts that are owed to family and friends are not viewed any differently than debts owed to other creditors. If you file for bankruptcy, it is likely that this money will be taken back and redistributed properly.
Myth #9: I Should Use My 401(K) Accounts to Pay Off My Debts Instead of Filing for Bankruptcy.
To avoid filing for bankruptcy, many people will tap into their 401(k) and retirement accounts. This, however, is a mistake in that these accounts may not have enough to satisfy your debts and may still leave you needing to file bankruptcy – except now you will not have those accounts any longer. In most bankruptcy filings, these will be protected by exemption laws, so it is in your best interests to safeguard them and use the tool of bankruptcy instead to get your life on stable ground once more.
Myth #10: Everyone Is Going to Know That I Have Filed for Bankruptcy.
The embarrassment of filing for bankruptcy is often enough to keep people from filing entirely. This, however, is a huge mistake. While bankruptcy is a public affair, there are very few newspapers and publications that will devote the space to running the names of everyone who is filing – and even fewer people who will devote the time to reading through the lists if they did. Therefore, unless you are a famous or public figure, it is highly unlikely that anyone except yourself, your lawyer and those that you want to tell will know anything about your bankruptcy filing.
Bankruptcy Attorney in Terre Haute
For those residing in Terre Haute, Indiana who require legal assistance, it may be in your best interest to speak to a bankruptcy attorney in Terre Haute today. It can be difficult to find an experienced bankruptcy lawyer in Terre Haute. Luckily, the Rowdy Williams Law Firm has years of experience in bankruptcy law. Call their firm today in order to speak to a Terre Haute bankruptcy attorney.