“It is hard to file for bankruptcy.”
The process of filing for bankruptcy can be straightforward, however it does require honesty, integrity and at time making tough decisions. How hard will it be if you do not file for bankruptcy? Seeking advice from an attorney may help you find the answer to your situation.
“A person who files for bankruptcy is untruthful.”
Life-changing events that impact health, relationships, and income affect people’s decisions to file for bankruptcy. While many people who file for bankruptcy want to pay their debts, economic changes and healthcare costs can impact earnings and make bankruptcy the most reasonable option toward financial resolution. A person filing bankruptcy must be truthful. The question of your integrity is actually a question of fact pertaining to the law. Did you borrow the money with the intent of being protected from collection of that debt by filing bankruptcy? If the answer is yes, you most likely will be acting in bad faith. If you honestly intended on paying your debts at the time you obtained them, and believed that you would be able to, and you were honest in applying for the debt but your circumstances have changed; you probably have met the good faith test’s requirements.
“Filing for bankruptcy will disqualify me from obtaining future credit.”
While it is true, that if you file for bankruptcy it will appear on your credit report for up to 10 years, the bankruptcy protections allow you to rebuild your credit from the day of filing.
If filing for bankruptcy, it is likely that your credit is already considered “bad.” Filing for bankruptcy can actually help you to get “good credit” again, once you established a new record of paying on time.
“If I file for bankruptcy, I’ll lose my home and/or property.”
Many people file bankruptcy for the purpose of protecting their home. In fact, many homes can be saved by modification during the bankruptcy (with the lender’s discretion), reinstatement in a chapter 13 plan by paying the arrearage or by protection from other debts which were taking the money you needed to pay the mortgage or other essentials.
“I won’t be able to own property after I file for bankruptcy.”
For some debtors, they lose nothing in a bankruptcy, except for fees and costs, in a bankruptcy and gain a fresh start. Generally, in a Chapter 7 anything you acquire or receive after the bankruptcy discharge is not part of the bankruptcy estate. In a Chapter 13, any property you receive after filing, including tax refunds, must be reported to the Trustee. It is best to consult with an attorney so they can advise you on your exemptions and reasonable expectations.
“My back taxes will be discharged if I file for bankruptcy.”
Some back taxes can be eliminated in a bankruptcy according to some complex tax rules. In other cases a payment plan worked out with the IRS can halt interest and penalties from being added where the taxes cannot be eliminated. Usually it is difficult to eliminate recent back taxes, while certain types of taxes take priority and cannot be discharged.
“My student loans will be discharged by filing for bankruptcy.”
Student loans are usually non-dischargeable, unless the debtor can prove certain undue hardship. This is rare and difficult.
“I can elect to pay some creditors and claim bankruptcy to others.”
All your creditors and anyone else who claims you owe them something will be included in the bankruptcy petition. Any creditors you owe cannot be omitted in the petition for bankruptcy, otherwise the claim is considered fraudulent. However, you can still pay anyone back that you wish, as long as it is with your exempt funds, and does not reduce your obligation to pay toward your other debts.
“If a family member has loaned me money toward my debts, then they’ll never get it back if I file for bankruptcy.”
You can pay back anyone you want, voluntarily. Sometimes creditors will try and negotiate a reaffirmation agreement. Reaffirmation agreements make you personally liable for the debt again. If a reaffirmation agreement is approved by the court, you remain liable on the reaffirmed debt.
“If I sign an agreement that states a debt can’t be dismissed, in bankruptcy the debt will not be discharged.”
Creditors insert these “anti bankruptcy” clauses to bluff debtors into not filing bankruptcy. However, many of these clauses are not enforceable.
“I can only qualify for bankruptcy once in my life.”
You cannot file a Chapter 7 more than once every 8 years. You cannot file a Chapter 13 if you received a Chapter 7, 11, or 12 discharge less than 4 years ago or you received another Chapter 13 discharge less than 2 years ago. Furthermore, while you can file more often for a Chapter 13 court-approved debt repayment plan, you cannot have two simultaneously open cases.
“I won’t be able to open a bank account if I claim bankruptcy.”
No rule prevents you from opening a bank account if you claim bankruptcy.
“Since I’m married, we both have to file for bankruptcy.”
Not necessarily. If filing jointly, all assets and income are generally joined. If only one spouse is filing and both are living together, then only the filing spouse’s assets are considered, but both of the spouses’ income is included in the bankruptcy calculations.