If you are considering filing for protection under the federal bankruptcy laws, you may be uncertain what your rights are, what can be protected in bankruptcy, and what you might lose. There are a lot of myths about the benefits and consequences of filing for bankruptcy. On this page, we will dispel the myths and provide you with the facts.
Contact Thomas F. Miles, Attorney and Counselor at Law at 619-631-4833 or 866-471-0416 for a free initial consultation.
General Misconceptions About Bankruptcy
- A bankruptcy filing is a sign of personal failure. Most bankruptcies result from unexpected situations, such as medical problems, the loss of your job or divorce. It's also a sign you want to do something positive to protect you and your family as well as your possessions.
- Filing for bankruptcy will result in public humiliation. Even though a bankruptcy is a public filing, there are so many bankruptcies that they tend only to appear in legal publications. Most likely, your bankruptcy will only be known to you and your creditors.
- Bankruptcy filings are extremely complicated. To the contrary, they can be simple. A lawyer is not required, but you could be at a significant disadvantage without one.
- The bankruptcy laws only allow you to file once. This is not true. There are time limits – a Chapter 7 bankruptcy can only be filed every eight years. A Chapter 13 petition can be filed two years after a Chapter 7.
- A married person cannot file individually for bankruptcy. If the debt is in your name alone, you can file separately. However, if you are both responsible, you should both file or your creditor, because of community property laws, may continue to pursue payment from your spouse.
Myths About The Effect Of Filing Bankruptcy
Examples of bankruptcy myths include:
- All debts can be discharged in a Chapter 7 (liquidation) bankruptcy. Certain obligations, such as student loan debts, child support and alimony arrearages are not discharged. Debts resulting from fraud or illegal activity may not be extinguished by a Chapter 7 filing.
- You can't discharge tax obligations in a bankruptcy proceeding. There are some major exceptions to this general rule, provided you have filed all your returns and that the tax debt is more than three years old.
- You will lose all your property in a Chapter 7 bankruptcy. The bankruptcy laws vary from state to state, but all states have exemptions for certain types of property. These include principal residence, motor vehicle, retirement funds and some personal property, such as clothing and household goods. We use those exemptions to protect your assets to the fullest extent possible.
Myths About Bankruptcy And Credit
- Bankruptcy will prevent you from getting credit in the future. There are many lenders, called subprime lenders, who are willing to extend credit to individuals who have filed for bankruptcy. You will, however, most likely pay significantly higher interest rates if such credit is provided. Be careful regarding these fees before accepting such credit.
- Filing for bankruptcy can improve your credit rating. Just because you have removed all debts from your credit record does not mean your credit score will go up. A bankruptcy filing can stay on your credit record for 10 years. This can have a far worse impact on your credit history than the late payment of an existing debt. However, you can begin to re-establish a good credit rating with timely payments upon any new debt.
- Running up your credit cards. You cannot run up your credit cards in anticipation of filing bankruptcy and then discharge those debts. This is considered to be fraud and is generally not allowable. The reason for this is that you presumably borrowed the money without any intent to repay.
At the office of Thomas F. Miles, Attorney and Counselor at Law, in El Cajon, we have over 37 years of experience protecting the legal rights of individuals throughout San Diego County and the surrounding communities. We built our successful practice on a commitment to personal service and attention. We work hard to establish trusting and positive relationships with our clients, taking an honest and ethical approach to creatively resolving your problems. We handle Chapter 13 as well as Chapter 7 bankruptcy proceedings.
To set up a free initial consultation, contact us via email, or call us at 619-631-4833 or 866-471-0416. We are open from 9 a.m. until 5 p.m., Monday through Friday, and evenings and weekends by appointment. Our office is located in El Cajon, just one block west of the courthouse and civic center. We can meet with you in your home, if necessary.
We are a Federally Designated Debt Relief Agency.