A wave of people are running for bankruptcy protection. When the U. S. Supreme Court struck down the nationwide moratorium on evictions millions of people who had been living in homes and apartments without the ability to pay their monthly expense came face to face with eviction. Since the pandemic began landlords and banks were stuck with increasing debt and the inability to reclaim the property due to the eviction moratorium instituted by the government to ease the debt crisis as Americans were forced into quarantine. Many took government assistance set aside for paying rent and mortgages and used it on other things knowing that they could not be evicted. Now, combined with the fact that pandemic unemployment compensation is ending, millions of Americans face a bleak fall with little ability to pay.
For years people have avoided bankruptcy due to the fears based upon myths that have developed. The fact is, bankruptcy is a responsible and viable option for many. Once you file, all debt collection must stop. Evictions are halted provided that judgment has not been entered. Yet many will stay clear of this option because of the myths we learned through the years. If you are to make an informed decision you need to be able to separate fact from fiction. Here are the biggest myths revealed.
1) Myth: Bankruptcy doesn’t really git rid of debt. Fact: Yes, Bankruptcy lets you get rid of debt or restructure it depending upon which chapter you file for. If you file for Chapter 7 you can get rid of debt without ever having to pay some creditors.
2) Myth: Everyone will know that I filled for Bankruptcy. Fact: No, they won’t. Unless you are famous with reporters following you around, no one will know unless you tell them.
3) Myth: I will lose everything that I have. Fact: Most Chapter 7 filers do not lose anything. There are many laws that allow you to keep the property that you own. The Bankruptcy Code specifically has exceptions to protect personal and household property.
4) Myth: I will never be able to own anything again. Fact: Once your debt is gone you can quickly build your credit back. You will probably be receiving credit card offers very soon. With increased credit and the money you have in the bank, you will be able to purchase things quickly.
5) Myth: Filing for Bankruptcy means that I am a bad person. Fact: Filing for Bankruptcy means that you are a good person who acts responsibly. You are repairing your credit and addressing your debts head on instead of avoiding them with promises to pay that you know you can’t keep. Stop blaming yourself! Most people who file for Bankruptcy are good, honest, hard-working people.
6) Myth: Filing for bankruptcy will ruin your credit for 10 years. Fact: While the bankruptcy filing will be visible on your credit report for 10 years your credit will not be harmed that long. Yes, your credit will go down. How much depends on where it was before you filed. And let’s remember, your credit was not that good to begin with if you have been missing payments. But once your debts are eliminated, your credit will recover quickly. Added to the fact that you will now have the money to pay your bills once the debt service is removed for the old debt, you should be able to build your credit up quickly.
7) Myth: If you are married both you and your spouse must file. Fact: There is no requirement that both spouses have to file. Generally, the spouse with the most debt should file leaving the other spouse completely out of the process and without a drop in their credit. Only where both spouses have a large amount of debt should both consider filing.
8) Myth: Its really hard to file for Bankruptcy. Fact: The process is quite simple. However, an experienced attorney will know all of the deductions and exceptions that can be used to save much if not all of your property. Knowledge and experience are power.
9) Myth: Bankruptcy leads to divorce. Fact: The opposite is true. A large percentage of divorces are caused by financial pressure. Once you file, that pressure is removed allowing you to get back to your life.
10) Myth: You can only file for Bankruptcy once. Fact: You can file and get a discharge of your debt under Chapter 7 every 8 years. If you need additional protection there are other types of Bankruptcy that you can apply for.
11) Myth: You can’t get rid of back taxes. Fact: Bankruptcy can eliminate many back taxes. There are about 4-5 qualifications that you will have to meet and you will have to be current on your filings but if you meet the qualifications, you can avoid thousands of dollars in back taxes.
12) Myth: You can’t afford to file. Fact: In many instances you can’t afford not to. While you may not be able to file with all of the debt that you are paying, if that debt were removed, you would have sufficient funds to file with a good bankruptcy attorney. Be up front with your attorney and they can help guide you in paying for this protection.
Knowledge is power. The attorneys at Penglase & Benson are experienced with Bankruptcy and can help you determine if it is the right option for you.
