Most of us worry about filing for bankruptcy. The truth is that we only worry because we don’t know the “ins and outs” of filing for bankruptcy. If you knew what we know you wouldn’t worry either! Our intent is to help you understand and break down the lies and myths about bankruptcy. We want you to know every dirty little secret about it. Most of us form negative opinions about filing for bankruptcy and we do it based on stories we hear from our close friends/family or what we read on the internet. Fact is, that most of what you know about bankruptcy is likely a lie; and worse your creditors are the ones who best promote these lies. The collection calls you are getting are the best proof of how far a bank.creditor is willing to go to lie and scare you into paying. Lets confront the most common myths together so you can be a bankruptcy expert and make your own decision as to whether or not it is good for you.
The truth is, that for most of us there are usually more advantages than disadvantages when filing for personal bankruptcy.
MYTH #1: Your Credit Will Suck Forever if You File For Bankruptcy.
Absolutely FALSE. Fact is that your credit can rebuild faster than ever after filing for bankruptcy. Most of our clients see a 720 or better credit score in as little as 18 months after filing. Additionally, you will even qualify for new car loans, and credit cards within a few weeks of filing! You will likely even qualify for a new home loan with zero negative impact in as little as 1.5-2 years after filing! The myth is based on the false assumption that since the bankruptcy will appear on your credit score for several years that it must therefore be a negative ding on your score. That is simply not true.
MYTH #2: I Will Lose Everything I Own If I File Bankruptcy.
SIMPLY NOT TRUE. Bankruptcy is not designed to leave you with nothing. The main purpose is to help grant relief and put you in the best possible position to rebuild. Most of our chapter 7 Arizona bankruptcy clients do not lose a single thing. In Arizona, there are federal bankruptcy rules and exemptions to protect you from losing such things as your house, your cars, household goods and furnishings, IRAs, retirement plans, and a great number of other things. Even in a chapter 13 Arizona bankruptcy, in the rare case where you have more property than can be protected through the exemptions, you can typically keep this property by paying a higher chapter 13 plan payment. Bankruptcy doesn’t strip you down and leave you out on the streets. For the most part you are allowed to keep everything through your bankruptcy… except that private yacht you own floating out there in the Greek Isles.
One important note is that some of the debt you likely have is attached to some of the assets you have. We call this debt secured debt. A good example of a secured debt is your mortgage attached to your house, or your car loan attached to your car. Your bankruptcy does not generally wipe out or get rid of mortgages or liens against your property, or get rid of that car loan IF you are also still wanting to keep your house and car. Therefore, if you want to keep a car, truck, home or business equipment that serves as collateral for a loan, you will also need to keep paying on that specific debt. Of course the choice is yours… sometimes the cars or houses our clients own are so upside down that keeping them and keeping the debt with them is no longer a good idea and a bankruptcy will completely solve the matter. You can in those circumstances choose to eliminate the debt and give back the car or house with ZERO additional consequences as you will be fully protected by your bankruptcy. Call us at 480-656-8333, and schedule your free consult so we can help you figure out how to keep your personal belongings in your bankruptcy.
MYTH #3: Lenders Will Ignore You if You File for Bankruptcy.
Again, this is False. See myth #1 as well. After Congress passed the new bankruptcy laws in 2005, much of the negative stigma associated with bankruptcy in the financial world disappeared. Most all lenders understand the problems with our economy and the impact of this crisis on consumers. As mentioned above, many will offer credit to those affected by bankruptcy within a few weeks to a few months.
MYTH #4: I Will Go to Jail if I File Bankruptcy.
Nope. Totally False. There are rules against stealing money from someone. But not being able to pay your expenses because life can just happen is not stealing. Congress created the federal bankruptcy laws to assist hard working people eliminate their debts and move on with their lives. If you are facing this type of hardship, bankruptcy is designed to help you. We have your back, we can help.
Each year, over one million people choose to file for bankruptcy, whether through Chapter 7 or Chapter 13. These are good people, just like you, who are in difficult financial situations. Life happens, and it when it does our ability to pay some of our obligations just disappears. Whether you lost your job and can’t pay your credit cards, or became ill or injured and incurred significant medical bills, you are not a bad person for choosing bankruptcy relief. This is exactly why we have the right to bankruptcy built into the constitution.
MYTH #5: Filing Bankruptcy Is Very Difficult and Could Result in an Audit.
I love this one because it is FALSE in most cases. the truth is that filing bankruptcy is a federal process and the paperwork is intense. That is why you want to hire the best bankruptcy lawyer you can find. However, filing bankruptcy is much easier now than it was in the past. While the law requires various intensive federal forms to be filled out and submitted to the court, we are hired to ensure that these are done correctly and that your bankruptcy is smooth and stress free.
For most of our clients we simply need an intake form completed, values for your property, bank statements for 3 months, tax returns for 2 years, paystubs for 6 months and a list of your debts. We handle the rest. We have the necessary experience, reputation with the courts, and dedication to make your filing go smoothly and efficiently.
Of course there is always that 1 in a 1,000 chance that after filing, a Trustee assigned to your case may require additional financial documentation and choose to audit your case. These are extremely rare (literally the current audit rate is approximately 1 out of every 1000 cases filed). In the rare instance of an audit, we have your back! We do not ratchet up our fees like all of our competitors. We honor our fee agreement with you and do whatever is necessary to complete your case in a smooth and stress free way. We have always successfully assisted our clients through the audit with no problems. the real truth is that our clients are far less likely to ever get audited because our bankruptcy filings are so thorough and backed by an impeccable reputation with the trustees and the bankruptcy courts.
MYTH #6: I Must File Bankruptcy With My Spouse Even Though I Want to File Without Them.
Wait for it… COMPLETELY FALSE. We love this one, and we here it all the time. The fact is that sometimes your spouse simply doesn’t want to file with you. usually this is the case because your spouse doesn’t fully understand bankruptcy and is either scared or their pride may be getting in the way. No matter the reason we completely understand! Luckily the bankruptcy laws permit anyone to file for bankruptcy, whether individually or jointly. You can absolutely file your bankruptcy without your spouse.
However, you should know that we are absolutely willing to help out where we can and we offer a second follow up consultation for free with you and your spouse to answer any question he/or she may have. Sometimes it is very good for both spouses to jump on the bankruptcy, and sometimes it is actually a great idea to leave your spouse off the bankruptcy all together. For example, if you and your spouse have joint debts together, such as a mortgage, credit cards, and/or loans, then filing together makes sense. Yet, in new marriages, where one spouse has good credit or no joint debts, it may be smarter for the other spouse to file individually to eliminate his or her own debts.
Schedule with us today and we will help figure this out with you.
MYTH #7: I Can Only File for Bankruptcy One Time.
And this is also WRONG. In 2005 he bankruptcy laws were tightened a bit, but not so much to actually prevent you from filing more than once. The real issue here is actually the timing of it all. Timing is key to knowing when you can file again. We totally understand that nobody wants to file a bankruptcy even one time let alone more than once. But because life can simply happen to all of us here are the basic and essential timelines that you should know so you can understand if you can file more than one bankruptcy.
- In a Chapter 7 Bankruptcy you can only receive a discharge once every 8 years.
- In a Chapter 13 Bankruptcy you can only receive a discharge every 2 years.
- If you get a Chapter 13 Bankruptcy discharge then you must wait 4 years before getting a Chapter 7 Bankruptcy discharge.
- If your prior bankruptcy case was dismissed “without prejudice” then there is typically no waiting period to re-file.
- If your prior bankruptcy case was dismissed “with prejudice” then you will have a waiting period attached. ***In these situations, it is important to contact a knowledgeable bankruptcy attorney, as there are certain motions that must be filed in order to extend the bankruptcy protection in your current case. We have the knowledge and experience to guide you through this process. This isn’t our first rodeo. We have assisted numerous clients with 2nd and 3rd bankruptcy filings.
MYTH #8: Bankruptcy Will Destroy My Credit Score.
This is just NOT TRUE. See Myth #1 and Myth #3. While your credit rating may be will be affected when you file, it will not be destroyed forever. Typically our clients do not have perfect credit when they file for bankruptcy. It is possible for the perfect credit score to be less than perfect immediately after filing for bankruptcy. However, for most of our clients their score goes up rather quickly. Depending on your situation and level of debts, you may actually increase your credit score by filing for bankruptcy. Bankruptcy is incredible and it helps eliminate the negative consequences of your unpaid debts, whether you file under Chapter 7 or Chapter 13. All of your negative credit activity will terminate, including interest, late fees, collection fees, and attorney fees. Ten years after filing, the bankruptcy will also be removed from your credit report, revealing a clean slate.
MYTH #9: Some Creditors Can Still Sue Me After My Bankruptcy.
This one is tricky because there is a small shred of truth to it for some real crazy exceptions. For most all of us this is just FALSE.
One of the primary reasons to file bankruptcy is to eliminate ALL collection activities. When you file the bankruptcy petition, whether through a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, you and your property receive automatic protection from the court against your creditors; this protection is known as the “automatic stay.” We love this part of the bankruptcy law and invoke it on behalf our clients when we file your bankruptcy. The automatic stay is the law that protects you from any collection attempts from any creditor, these can include the creditor’s attorneys, collection agencies, representatives, and/or agents. Federal law specifically prohibits your creditors from contacting you for any reason, including through law suits, written correspondence, monthly bills, or phone calls. Creditors must cease all collection efforts against you, meaning they cannot file a new suit, continue a prior lawsuit, or collect on a prior legal judgment. If they do, then you get to actually sue them in bankruptcy court and the fine can be up to $1,000 per collection attempt.
The problem is that there are exceptions to this rule. If you have a debt that is considered “non dischargeable” under the bankruptcy law then your creditors can resume their collection efforts against you. This is quite a process and requires your creditors to actually file a motion in your bankruptcy case to get permission to proceed against you. As you can imagine not all of them do, but most of the creditors who understand their debt is not going away in your bankruptcy will be eager to lift the automatic stay and start coming after you again. This is one more reason why it is absolutely important to come talk to us. We are incredible and are the best bankruptcy lawyers in Arizona. We can help with this tricky situation and craft some strategies on how to deal with these creditors with little to no impact on your bankruptcy case and on your life. Pre-planning for bankruptcy is super important and most attorneys just want to hurry and file as many cases as possible like some sort of bankruptcy factory. Not us. We are here for you, we have your back.
MYTH #10: Most People Do Not Qualify for Bankruptcy Anymore Because of the Means Test.
Also NOT TRUE. When the new bankruptcy laws passed in 2005, many people who wanted to file bankruptcy became frantic. Big banks and creditors tried to convince the entire country that bankruptcy would only apply to a small percentage of poor and destitute people. This was a massive lie and a total mis-characterization of the new laws. In reality, the 2005 legislation changed the method in which debtors qualify for bankruptcy under the Means Test, but it did not prevent people from filing. Qualifying is definitely an issue now more than ever. But the myth is that most people don’t qualify. In our opinion most people either qualify immediately for bankruptcy, or through our help can get to a point where they qualify. We are not just some bankruptcy mill pumping out massive amounts of filings as quickly as possible. We actually care about our clients and do what it takes to get them to legally qualify. We are experienced at getting most people to qualify.
The truth is that bankruptcy filings have actually increased since the new laws were enacted in 2005. Don’t believe what you hear — whether on television, the internet, in the newspaper, what your friends are saying on FaceBook or Instagram, etc. To learn the truth about the current bankruptcy laws and to see how you can qualify to file under Chapter 7 and/or Chapter 13, give us a call. We are here for you. We have your back.
MYTH #11: Personal Bankruptcy Will Ruin My Family.
NO WAY. Lots of things lead to family problems, but bankruptcy may actually offer a solution to some of your problems. In our professional and personal experience there is almost nothing more stressful in our family relationships than money problems. You may be on the brink of divorce because of your financial crisis. We see this a lot. In some cases, you can put a stop to the family problems you are facing by filing for bankruptcy and getting a fresh financial start. We have seen many of our clients emerge from their bankruptcy with a renewed vigor and sense of freedom in their financial status and family relationships.
MYTH #12: I Can Pick and Choose Which Debts and Property to Include on Bankruptcy.
This is actually FALSE. The bankruptcy laws require you to list all of your property and all of your debts. Don’t worry, we understand that leaving something off sounds like a good idea because you may want to keep that particular credit card, or you don’t want to ruin a relationship with your doctor by including your medical bills on your bankruptcy, etc. the fact is that you can still list these things and make payment arrangements to keep the obligations after your bankruptcy if you prefer. While not always wise to do so, we can certainly help you get through your bankruptcy and not get rid of some special types of debts you insist on keeping.
As far as your assets, listing them all is the only way to really protect them. Chances are that we can help you protect your assets if we simply knew of them before hand. Either through legal and strategic bankruptcy planning or through claiming the right exemption we can help you protect and keep most of all your assets. Not disclosing something is a bad idea in federal bankruptcy court.
MYTH #13: I Will Get Fired if I File Bankruptcy
NEVER. While there are lots of reasons why your boss may want to fie you, it is completely illegal to fire someone who filed for bankruptcy. Likewise, employers can not refuse to hire someone because of a bankruptcy filing. Honestly, our clients have all given us tons of positive feedback on this issue after they have filed. In fact, some notable governmental employers have sent their prospective employees over to us for a bankruptcy because their financial issues get cleaned up so nicely that they are more qualified for these military, police, and other governmental agency jobs after bankruptcy. This is so because of the security clearance required by these jobs is more readily granted to a cleaned up credit report.
MYTH #14: Everyone Will Know I Filed for Bankruptcy.
FALSE. When you file a bankruptcy then you have the choice to tell your friends and family or not. As your lawyers, our representation of you is 100% confidential. We can’t tell a soul you hired us no matter what you hired us for. Now, bankruptcy filings are a matter of public record and can show up on a credit report. But this means that someone would have to take a field trip to the federal bankruptcy court and do a public search to specifically check and see if you filed a bankruptcy. Essentially the only people who will ever know are the people you personally tell and the creditors we list on your bankruptcy paperwork. That is it.
Need more information about bankruptcy?
We are here for you and happy to help you with your bankruptcy. Call our Firm to speak to an experienced bankruptcy lawyer at 480-656-8333. The road to financial freedom and a fresh start begins right here.