Not True. Bankruptcy stays on your credit about 7 to 10 years. Although the bankruptcy will stay on your credit, you can start rebuilding your credit once your bankruptcy is discharged. Making current, full payments on debt is one way to start building your credit while you are still in the bankruptcy. Once you are out of bankruptcy, make sure that you watch your income to debt ratio and try to not finance more than 40% of your credit limit.
I will never be able to get another credit card or loan.
Many consumers believe they will not be eligible for any type of credit after a bankruptcy filing and discharge of debt. The opposite is true. Once debts have been discharged for a period of time, the process of credit restoration can begin and new trade lines can be opened. In some cases, clients receive credit card offers in the mail only two months after receiving their discharge. While the rebuilding of credit takes time and effort on the part of the debtor, bankruptcy is not a credit death sentence.
You will lose everything you own.
Not True. The goal of bankruptcy is to protect you and your assets, not to punish you and toss you into the streets. In probably 95% of the Chapter 7 cases, nothing is lost. In virtually all of the remaining 5% of cases, the Debtor knows going into the process that some property will be surrendered either to the Chapter 7 Trustee or to the secured creditor.
If you are behind in mortgage payments and need time to catch up, bankruptcy offers you the chance to reorganize your debts and catch up on the amount you are behind in payments, called “arrears,” over a period of 3-5 years. Try asking your lender if they will take your arrears over a 3-5 year period and they will fall over laughing! Once in bankruptcy, the lenders have no choice but to cooperate so long as you meet the qualifications and maintain the planned payment arrangement.
All debts are wiped out in Chapter 7 bankruptcy.
Not true. Certain types of debts cannot be discharged or erased. They include child support, alimony, government-issued or government-guaranteed student loans, and debts incurred as the result of fraud. It’s also very unlikely that a judge will discharge legal settlements you have been assessed, such as payments to someone who sued you.
Very few people qualify to eliminate their debt through Chapter 7.
Congress made the requirements for eliminating debt through Chapter 7 bankruptcy tougher with the new bankruptcy laws of 2005, but many people still qualify. Over 17,000 people in Southern Nevada filed Chapter 7 bankruptcy in 2009. At the initial consultation, an experienced attorney can determine if you qualify for Chapter 7.
You are a bad person for filing bankruptcy.
Not True. Bankruptcy is a solution to help good people go through a tough financial time. It provides people with the fresh start that they deserve. Congress passed the bankruptcy laws because Congress recognized that we needed a safety net in our economic system for individuals who have little control over large shifts in our economy or over unexpected personal developments such as job losses and medical expenses. The events of 2009 should make it clear to all of us that our financial health is not usually a function of whether we are good or bad people.
You can pick and choose what to put into bankruptcy.
Not True. You must list in your bankruptcy filing all of the debts that you owe and the property that you own. For some of those debts, such as car and home loans, we may help you “reaffirm” the debt, and it will be as if you never filed bankruptcy as far as that obligation is concerned. For debts that you do not formally reaffirm, if you feel like paying a particular creditor after the bankruptcy process has been completed, you are free to do that. But whether you intend to reaffirm or continue making payments on a debt does not affect your obligation to disclose all of your debts and property to us and to the Court.
You can only file bankruptcy once.
Not True. You can file for bankruptcy relief more than one time if you meet certain conditions. So that we can advise you regarding the availability of bankruptcy in your particular circumstances, you must disclose any prior filings to us.
Everyone will know that I filed bankruptcy.
Unless you are famous already, the odds are the only people that will know you filed are your creditors. Although bankruptcies are legal proceedings that are published in the newspaper, millions of people file bankruptcy and few papers publish every name. Even if they do, few people read the full legal notices every day.
All my debts will be eliminated if I file Chapter 7 bankruptcy.
Many types of debt can be erased. However, child support and alimony, student loans and debt incurred fraudulently cannot be eliminated.
If you are seriously considering filing for bankruptcy protection, you may wish to consult a reputable and experienced bankruptcy attorney who can help guide you through the confusing and complicated process. Having an attorney on your side can provide you with the peace of mind that comes from knowing all your bankruptcy bases are covered.
Randy M. Creighton, Esq.