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Common Bankruptcy Myths

Myth 1: If I file bankruptcy I will lose my house/car/personal belongings.

NOT TRUE:  In most cases you will not lose anything in the bankruptcy.  You will be entitled to “exempt” or protect most if not all of your property and belongings under state or federal exemption laws. For example in Kansas, Your home that you own or are buying is totally protected (if you are not behind on your payments, $20,000 of equity in your  car, $1,000 of jewelry, 100% in household goods, clothing).  There are many other exemptions that apply to other types of property.  I will perform a complete analysis of your property and exemptions so you will know if anything you own is at risk.   In cases where you do have non-exempt assets you may be able to use a chapter 13 to save your property.  If you have loans against your property such as a home or car, you must continue paying these loans in order to keep the property.

Myth 2: After filing bankruptcy I will not be able to get credit for 10 years:

NOT  TRUE:  A bankruptcy will be reported on your credit report for 10 years, but you will be able to obtain credit much sooner. Filing bankruptcy gets rid of debt.  Getting rid of debt puts you in a position to be able to pay the bills you do hav, and this makes you more attractive to potential lenders.  At first, the would-be lenders will want larger down payments than normal and will want to charge you higher interest rates.  However, over time, if you are careful, and do things that will impove your credit score, the loan terms you will be offered will improve. In fact many people can buy a car or a home shortly after the discharge of their case.  And many people will have substantially improved credit scores in 2 to 4 years. 

Myth 3: If I file for bankruptcy everyone will know.

While it is true that a bankruptcy is a public record, there are so many bankruptcies filed that probably no one you know will ever spend the time to review new filings. Most general circulation newspapers do not publish bankruptcy information but a few business-oriented newspapers do.  Fortunately most people do not read these papers and the bankruptcy information is buried in the back in small print. Also, the court now requires that only the last 4 digits of your social security number be available for the public record.  Only the court, trustee and the creditors that are sent notice of your case will have the full number.

Myth 4:  It's really hard to file for bankruptcy.

It can be confusing and difficult to file bankruptcy on your own, but in the hands of an experienced lawyer, filing a bankruptcy in the District of Kansas can be smooth and hassle free. I will ask for a variety of documents to help me prepare your case. I will take care of all the paperwork and calculations needed to make your case a success.

Myth 5:  Only bad people or deadbeats file for bankruptcy.

NOT TRUE: the overwhelming majority of people who file bankruptcy are good, hones, hard-working people.  They file as a last resort, after having spent months or years struggling to pay the bills left over from sone life-changing experience, such as a serious illness, the loss of a job, divorse, or a failed business. 

Myth 6: Filing bankruptcy  will hurt your credit rating:

Sometimes this is true but usually it is NOT TRUE.  A bankruptcy can often help you to rebuild your credit because your bad debts will be discharged and you will be a better credit risk to many lenders. Think of a bankruptcy as a dividing line between old bad credit that is already on your credit report and new good credit that will eventually be on your credit report.  If you do nothing the bad credit just keeps getting reported on your credit report again and again. A bankruptcy stops this cycle and allows you to put new good credit on your credit report.

Myth 7: You cannot get rid of taxes if you file bankruptcy. 

NOTE TRUE:  I have helped people get rid of hundreds of thousands of dollars of tax debts. Generally, if the tax is an income tax that was filed on time and was due more than three years ago, you can eliminate the tax debt entirely. Even if the tax cannot be eliminated, you may be able to use a chapter 13 to pay back the tax over a five-year period.  Determining whether or not taxes can be eliminated (discharged) can be tricky, especially if you have had a prior bankruptcy or an offer in compromise. It is best to talk with a lawyer so you will know if a bankruptcy can help you.

Myth 8:  You can only file bankruptcy every 7 years. 

Unfortunately the 2005 changes in the bankruptcy code changed the time between filing chapter 7 cases to 8 years.  However, there is HOPE:  You may be able to file a chapter 13 four years after a chapter 7.

Myth 9:  You can pick and choose which debts to list on your bankruptcy and leaving a debt off your bankruptcy means it is not included. 

BOTH NOT TRUE:  You must list all debts, even those you want to keep paying or debts owed family members. Intentionally leaving out a creditor is against the law. There are ways to keep debts after bankruptcy if you want to and my experience has been that most family members and friends you owe money to are very understanding about your financial difficulties.  And, you are free to pay back any creditor you want to after your case is done. Do not pay family members or friend before you file, but paying them afterward is perfectly acceptable.

Myth 10:  I will have to go to court and be grilled by my creditors.

NOT TRUE:  Most people that file for bankruptcy in Kansas never go to court. They do have to appear at a meeting of creditors, however, in most cases no creditors show up.  The main purpose of the meeting it to answer questions from the bankruptcy trustee about your property or any recent financial transactions you may have been involved in like selling a home or car.  He will also want to know if you have made any unusual payment to your creditors or if you have paid any friends or family members.  This meeting usually lasts less than 10 minutes.  I will make sure you are fully prepared for this meeting. I  know the types of questions each one is likely to ask you. 

 Myth 11: There is a minimum amount of debt required to file bankruptcy.

NOT TRUE: There is no minimum amount of debt that person must have to file a Kansas bankruptcy.  Practically speaking, the amount of debt you have must be looked at in relation to how much money you make.  For a person with little or no income, it may make sense to file bankruptcy with a relatively small amount of debt, where someone with higher income would find that amount of debt to be manageable.  For example, $10,000 in debt is unmanageable to someone who is making $1,500 a month, but that same debt would problably be manageable for a couple bring home $8,000.

Myth 12: I can max out my credit cards just before filing bankruptcy.

NOT TRUE: Debt acquired after you know you cannot repay your debts will likely have to be paid back even through you have a Kansas bankruptcy.  Doing this is considered fraud, and is a big no-no!  It is imporatant to discuss this issue with your bankruptcy attorney if have recent credit card use.

 

Important Disclaimer: I provide this website for information and advertising purposes only. It is not intended to and does not constitute bankruptcy assistance services or specific legal advice on a specific matter.  As I am sure you understand, I can only offer to provide such people that participate in a telephone or office consultation directly with me. The information contained on this website does not and should not be construed as legal advice.  You should not act on any of the information contained in this website without first conferring with an attorney licensed in your jurisdiction. No attorney-client relationship or privilege is formed by visiting this site or by sending unsolicited email. Initial emails should not contain any confidential information or information you want to keep secret. I am licensed only in Kansas and Missouri and offer my services only in Kansas and Missouri. The applicable laws may have changed after the information on this website was published. While I strive to keep the information current, you should not presume that all information is up to date since laws change frequently.  You must confer with an attorney to be sure you have current information.  Sections 341, 342, 527(a) and 527(b) of the Bankruptcy Code require that an “assisted person” be given certain required disclosures and notices.  I urge every person who is considering bankruptcy to seek the advice of a competent attorney.

The choice of a lawyer is an important decision and should not be based solely upon advertisements.