Bankruptcy Questions and Answers written by a former bankruptcy attorney. These FAQs have been written as a guide for consumers thinking of filing bankruptcy or deepening there knowledge of bankruptcy
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Bankruptcy Myths

Myth: If I file for bankruptcy my credit is destroyed and I must live with bad credit for the rest of my life.
Truth: While your situation will certainly define ďwhat is bad creditĒ right after you file, if you work hard to improve your credit you should have your credit score back at a level where you can , get an or respond to a knowing you can be approved within about 2-4 years.
Myth: If I file for chapter 7 bankruptcy they take everything I own including my home, car and personal possessions.
Truth: The bankruptcy court grants each person certain bankruptcy exemptions. Some areas only provides for specific state bankruptcy exemptions while others allow the debtor to select from either the state or the US federal bankruptcy exemptions. In either case most people in either chapter 7 or chapter 13 personal bankruptcy find that they get to keep most of their assets.
Myth: If I file bankruptcy I get to keep my house no matter what.
Truth: Answers to chapter 13 bankruptcy questions would reveal that not only can a chapter 13 help to keep you house, it provides one of the few foreclosure solutions you may employ with the bankís acceptance. On the other hand, remember what a chapter 13 bankruptcy is, a wage earner reorganization plan, as such it only succeeds if the debtor makes each and every monthly mortgage payment and bankruptcy trustee payment without fail. Most chapter 13 bankruptcy plans end up with the dismissal of the chapter 13 bankruptcy and the homeowner losing the home in the long run. Keep this foremost in your mind, it is true that a chapter 13 can , but only if the homeowner follows through with the plan of reorganization. The sad statistics reveal that most chapter 13 plans end up crashing. In unusual cases for those with a keen debtors get to keep their home too. Most often keeping a house in chapter 7 comes as a combination of little equity in the home and the debtor not being behind on mortgage payments at all.
Myth: No matter how bad my financial situation might be, if I find a bankruptcy lawyer that really knows the laws, the can make a plan that will fit my budget and allow me to keep my home.
Truth: You must meet several requirements to make a chapter 13 bankruptcy work. Before even dealing with your other bills, like you need the ability to pay your monthly mortgage payments in full going forward. On top of that you need to make a plan to address your mortgage arrearage and unsecured debt. How you develop a repayment plan specifically relies on rules of the bankruptcy court. To estimate what your payment might be use our . For many people exploring the various solutions to stop foreclosure chapter 13 fails to offer a method to keep their home, as payments under a chapter 13 plan almost always end up higher than regular mortgage payment prior to the bankruptcy filing. For people with income problems that prohibit them from paying the first mortgage, no chapter 13 plan can be constructed and approved.
Myth: If I file bankruptcy the whole world will know and I will be branded a failure for life.
Truth: Few jurisdictions publish bankruptcy filings in local papers. If you do not tell people about your bankruptcy they probably wonít know about it. Those that do know will soon forget. Debt and depression go together sometimes, but these often end up as self imposed personal issues much more than an organized effort of the society to shun a person who filed a bankruptcy.
Myth: I will need to appear before a judge in a room packed with people from my city who will make me feel like my faults are on display.
Truth: Most bankruptcy cases go before a trustee in a small setting, not in a court room with a judge and galleries full of people like you see on TV. If anyone else is there at all itís most likely other people in bankruptcy waiting their turn to have the same hearing.
Myth: As long as I file a chapter 13 bankruptcy close to the foreclosure date, give or take, I get to keep my home.
Truth: If you file chapter 13 even one minute after foreclosure auction you waited too long and you lose your home. Even if you filed in time you need to make sure the bank and the auctioneer know your docket number and stop the sale.
Myth: If I change my mind about filing bankruptcy I make a motion for the court to just dismiss the case and itís like I never filed in the first place.
Truth: While itís true a debtor retains the right to dismiss their bankruptcy in most cases, certain ramifications continue. Your credit report will display that you filed bankruptcy even if you dismiss the bankruptcy after only a few days later and the bankruptcy court will mark it as a filed bankruptcy so that you will not be allowed to file another bankruptcy for many years.
Myth: If I want to retain something I just leave it out of my bankruptcy. Like if I have a car I love I donít include it in my filings. In that case I might still owe the auto loan, but I get to keep my car.
Truth: You must include all income and assets in your bankruptcy, no picking and choosing for the debtor. The trustee gets to pick and choose what to take, if anything, after exemptions. Trying to exclude an asset and hide it from the trustee can be a crime and void your bankruptcy discharge.
Myth: If I want to leave out a liability I can just ignore it in the bankruptcy. So if I want a credit card for later I just leave one of my cards out or the filing and I get to keep it.
Truth: While this may not be against the law, it does not make for a good plan. If you want a credit card after your bankruptcy try a secured credit card. You can read more about the benefits of a secured credit card to understand why I like this option much better for debtors going through bankruptcy.
Myth: No law prevents a person from filing bankruptcy on their own, itís called filing pro se and you can even get the bankruptcy forms right online. The fact that the courts allow this and that itís so easy to do means no one really needs to and that debtors should save what little cash they have and prepare all their bankruptcy by themselves.
Truth: While what to spend money on in a cash crisis merits quite a discussion on its own, deciding if you need to hire a bankruptcy attorney involves a broader discussion that just money. Filing a chapter 7 bankruptcy takes skill and putting together everything needed for a chapter 13 requires even more expertise, doing things wrong risks losing your discharge without the right to file bankruptcy again. It most cases you donít want to take that chance. Spend the money and find a bankruptcy lawyer.
Myth: Bankruptcy costs nothing to file.
Truth: Even if you file your own bankruptcy, you still need to pay all bankruptcy court fees, which will likely cost hundreds of dollars.
Myth: Chapter 13 legal fee quotes from lawyers sound like more than I can afford. I have no choice but to lose my home to foreclosure because chapter 13 sat as my final hope even though I could have made a viable reorganization plan. I canít afford the legal fees to file so I need to move.
Truth: Not every chapter 13 lawyer will do this, and fewer come forward to volunteer the information, but some chapter 13 bankruptcy attorneys take a small down payment at the start of the case and build the balance of their legal fees into the plan so that people with little or no money at the time of filing bankruptcy may still take advantage of chapter 13 and save their home. If you fall into this group, you may need to speak with several potential lawyers until you find one willing to agree to this payment arrangement, but they do exist in most areas. As a last resort you can file yourself, although I advise against it.
Myth: I can wait until the very last second because bankruptcy gets filed right here at my local courthouse.
Truth: The bankruptcy courts maintain their own systems of courthouses and hearing offices. While you might not have to travel far for your bankruptcy hearings, most times the original filing must be done at a specific bankruptcy court. If you they take care of these things. If you want to do it yourself you need to know where to go. For most people it turns out to not be where they predicted they could file, because they thought of a general court and not the bankruptcy court. It may not be unusual for the proper bankruptcy court for the original filing to rest many hours from your house by car.
Myth: If I file bankruptcy I automatically lose my job.
Truth: For almost everyone this ranks as pure misconception. Certain jobs in banks or government employees with very high security clearance might claim exceptions, but in general you need not be too concerned.
Myth: If I file a chapter 7 bankruptcy and I make a lot of money years from now, I must pay all my debt at that time.
Truth: Unless you knew about money coming your way or did something fraudulent, if you make money after your chapter 7 bankruptcy discharge you get to keep it and owe nothing to the discharged creditors.
Myth: If Iím in the middle of a chapter 13 plan and I triple my salary I get to keep all that extra money.
Truth: If you income changes during a chapter 13 bankruptcy you are supposed to report it to the bankruptcy trustee to see if you need an adjustment to your repayment plan, such as paying a larger percentage of the original debt to unsecured creditors.
Myth: If I need to file chapter 7 bankruptcy and Iím married my spouse needs to file as well.
Truth: The critical issue for this question revolves more on who owes the money than the relationship between the people. If two individuals, either related or unrelated, took on credit card debt by either being a primary card holder or a guarantor, than unless they all file bankruptcy, the creditor maintains the right to pursue the person who did not file for the entire amount due. On the other hand, even if two people are married, and only one spouse signed up for the credit card and that particular spouse alone ran up all of the debt on that card, than only the spouse who incurred the debt need file bankruptcy. This comes up frequently as a chapter 7 bankruptcy question.
Myth: If people own a house together and need to file a chapter 13 to save it, everyone on either the title or the mortgage needs to file together.
Truth: Any one party on the title to the home may file a chapter 13 and stop foreclosure. This becomes a critical point for a married couple who file only to see their because if only one spouse filed and things change before the foreclosure auction so that they could afford a new plan, the other spouse still maintains their right to file a chapter 13 of their own and they get a second chance.
Myth: A parent died and left me everything, but the only thing I got was $100,000 in bills, it looks like this credit card debt will cause me to file bankruptcy.
Truth: Heirs do not need to pay the debts of the deceased except to the extent there are assets to pay them as a part of the estate of the departed.
Myth: If my chapter 13 gets dismissed I must leave my home ASAP.
Truth: Even after the , you will likely have months before you need to move. The bank still needs to restart the and than evict you after they foreclose.
Myth: Only a business or corporation may file for chapter 11 bankruptcy.
Truth: Certain parameters apply and chapter 11 can involve some very high legal fees, but if you really need it, an individual may file for chapter 11.
Myth: A person can file chapter 7 and wipe out all of their debt no matter how much they make or how many assets they have. US citizens have an absolute right to file chapter 7 bankruptcy.
Truth: If you do not meet the chapter 7 means test you must file for chapter 13 bankruptcy instead. Those with non-exempted assets may find their assets lost to the bankruptcy trustee for the benefit of their creditors. People might get the right to file, but not which chapter they qualify for nor how the case might resolve for them.
Myth: Those who qualify for a chapter 7 bankruptcy discharge get all of their debts wiped out and no longer owe a penny on anything.
Truth: Chapter 7 can discharge most debt including credit card debt and even mortgage debt. Many debts, however, specifically do not get discharged in bankruptcy. These non-dischargeable debts include many student loans, court ordered payments and certain taxes.
Myth: If I file a chapter 7 I can cancel my mortgage debt and never need to pay the monthly mortgage again so I can live in my house for free.
Truth: While this one may start off as true, you wonít live in that house too long for free. A chapter 7 can indeed provide forgiveness of mortgage debt and you never need to pay again if you donít want to. In these cases only the debt goes away, the bankís secure interest in your property remains. So although you do not need to make a monthly payment and you will owe no mortgage deficiency, they keep the right to foreclose and take the home back. The same concept applies in chapter 7 to cars and car loans.
Myth: If I end up with more problems later it doesnít matter because I can just file another bankruptcy down the road.
Truth: Current bankruptcy laws require you to wait many years before you can file another bankruptcy.
Myth: I really needed to change my consumer spending habits but I didnít and now Iím out of debt help solutions. I do not want to file bankruptcy and Iím afraid one day the credit card companies and going to put me into bankruptcy themselves.
Truth: You are talking about the concept of an involuntary bankruptcy. In most cases this happens to businesses. Credit card companies' forcing someone into an involuntary personal bankruptcy almost never happens.
Myth: I saw something on national TV about a bankruptcy case someplace else, I should get the same treatment if I file.
Truth: Not only are bankruptcy cases very individual stories with unique outcomes, state laws including state specific bankruptcy exemptions vary greatly not to mention . Even people with the exact same income expenses, debts and assets experience very different results depending on where they live.
Myth: Being in a chapter 13 bankruptcy operates just like things used with my mortgage before bankruptcy. Iíll miss some payments, catch up on a few, make a plan to work it out, and it goes on like that a long time.
Truth: When you miss a payment while in a chapter 13 bankruptcy you got trouble. Either the mortgage payment or the trustee payment counts. Just one or two late payments and you will find yourself looking at and foreclosure. If you make every single payment in chapter 13 it provides great power to save your home, but at the same time it yields little or no leeway should you experience even .
Myth: You must be a US citizen to file a bankruptcy under United States bankruptcy laws.
Truth: Resident aliens and non citizens who own property in the United States may have rights to file certain bankruptcies and discharge some debts.
Myth: Even if my payments are current I have a clause in my loan documents that says if I file bankruptcy I lose my collateral, so regardless of bankruptcy laws or exemptions I will lose that asset.
Truth: Most loan documents contain this clause. If the bankruptcy trustee wants to abandon the asset, which means as far as they are concerned you get to keep it, then you and the bank need to work it out. Sometimes as long as you keep payments current the lender will just take your money and make no effort to get the asset. In other cases they will ask you to reaffirm the debt, which basically means you commit to still owing the money even though the bankruptcy court granted you a discharge of the debt.


 

Bankruptcy Questions, Answers and Information

Bankruptcy FAQs
Chapter 7 Bankruptcy FAQ
Chapter 7 vs. Chapter 13 Bankruptcy FAQ
What is Chapter 13 FAQ
Chapter 13 Bankruptcy Calculator
Who Should File Chapter 13 Bankruptcy FAQ
Chapter 13 Bankruptcy Process Questions
Bankruptcy FAQ – Chapter 13 – Case Dismissal
Bankruptcy vs. Foreclosure FAQ
Bankruptcy Lawyer FAQ Part I - Find An Attorney
Bankruptcy Lawyer FAQ Part II - Hire An Attorney
Bankruptcy and Tax Debt FAQ
Student Loan Debt in Bankruptcy FAQ
Non-Bankruptcy Solutions Vs. Bankruptcy FAQ
Bankruptcy Information
Bankruptcy Alternatives - Debtor's Options
US Federal Personal Bankruptcy Exemptions
US States Personal Bankruptcy Exemptions
Table Of Which US States Use Federal Exemptions
Bankruptcy Abuse Prevention Act - 2005
Chapter 11 Overview
Bankruptcy Forms
Dictionary Of Bankruptcy Terminology

Bankruptcy Alternatives
& Debt Or Credit Help


Bankruptcy Alternatives - Debtor's Options
Stop Home Foreclosure Help Articles And FAQs
How To Stop Foreclosure Options Explained
Foreclosure Process Information FAQ
Short Sale FAQ
Deed in Lieu Of Foreclosure FAQ
Understanding And Erasing Credit Card Debt
Credit Card Debt Relief - Debt Settlement
Free Online Credit Improvement Course
Credit Rebuilding Article
Understand Credit Score
Loan Options For Bad Credit Borrowers
Directory Of Bad Credit Mortgage Brokers
Credit Cards For People With Bad Credit Articles
Free Interactive Budget Calculator And Analysis
Who To Pay When You Can't Pay Everyone
How To Get Money When You Need Money
Debt Calculators
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