Top Ten Myths About Bankruptcy
Myth: The 2005 Bankruptcy law overhaul eliminated the “no payment” Chapter 7 option.
Fact: Although there are more hoops to jump through the “no payment” Chapter 7 still exists. Chapter 7 bankruptcy is designed to result in the full discharge of debts, without the need for a payment plan. While it is true that a Means Test was created in order to reduce the number of potential debtors that are eligible to file a Chapter 7, the threshold is generous. Therefore, many potential debtors are surprised to learn that they qualify for a Chapter 7 and were never in danger of failing the Means Test.
Myth: If I file bankruptcy I will lose my house, car, and retirement.
Fact: Most Bankruptcy clients lose nothing except their debts. The exemption laws in North Carolina are robust. Exemptions are nothing more than your ability to protect your assets (house, car, and retirement). The North Carolina exemptions laws tend to protect normal and reasonable property. That property generally falls into the category of “average”, thus if you consider your lifestyle to be “average”, there is a very good chance that the North Carolina exemptions will cover all your property and you will not lose anything.
Myth: The Court will come to my house and look around.
Fact: The Court almost never visits your house. The Bankruptcy Court is flooded with bankruptcy cases and does not have the time or resources to come inspect every Debtor’s home or apartment. Granted, the Bankruptcy Trustees have the ability to do so under the law, but such practice is rare, almost nonexistent.
Myth: Everyone will find out when I file bankruptcy.
Fact: Filing bankruptcy is public record, but newspapers generally do not publish a list. Typically, the only people who find out about your bankruptcy are your creditors and those people you want to tell. Granted, Bankruptcy is a Federal Law matter and thus, it is public. However, special access is required to retrieve the information and no advertisement is made. Surprisingly, many former bankruptcy debtors tend to be more open about their filing after the fact; they feel relieved about their decision and want to help others that have similar debt struggles.
Myth: If I file bankruptcy I will not be able to get credit again.
Fact: Many Bankruptcy filers are able to get an unsecured credit card shortly after filing. Further, Fannie Mae/Freddie Mac has just a 3 year moratorium on house financing.
Myth: Bankruptcy is too expensive.
Fact: Clients generally find that bankruptcy costs/fees equate to only a few months’ worth of debt payments or less than 10% of their outstanding debt. While any legal work with an attorney is expensive, we have found that most clients are shocked to hear about the affordability of bankruptcy, especially when realizing that the fees and costs are a mere fraction of their overall debt.
Myth: I will be fired if I file bankruptcy.
Fact: Employers are not allowed to fire you simply because you filed bankruptcy. Employers may not offer you a future job or they may fire you for wearing ugly shoes, but firing a person because they filed bankruptcy is not allowed.
Myth: If I file bankruptcy, my spouse has to file with me.
Fact: Your spouse does not have to file bankruptcy with you. Any married debtor contemplating bankruptcy may invite their spouse to join in the bankruptcy, but does not have to. The tough decision is whether to include them and whether your spouse has enough debt to join in the bankruptcy. That is a personal decision, but debtors need to recognize that any joint debt held between the two spouses will STILL be owed by the spouse that decides not to file jointly.
Myth: My debts can’t or won’t be discharged.
Fact: Most debts except student loans, taxes less than 3 years old, debts incurred via fraud,anddomesticsupport obligations are discharged in bankruptcy.
Myth: My creditors will continue to harass me after filing bankruptcy.
Fact: Creditors can be sanctioned and required to pay fines by the Court for attempting to collect discharged debt.
Arnold & Smith, PLLC has experienced attorneys in the field of creditor and debtor relations and can help navigate the process for you. If you would like to set up a consultation with one of our attorneys, please and not hesitate to contact us. We look forward to assisting you.