Bankruptcy Myths (Part 3)

           This is the third installment in the section about common myths and misconceptions about Bankruptcy.  These are all dealt with in greater detail in my book "Should I File" A Definitive Guide to Bankruptcy."  Which is designed to help you make intelligent choices about whether or not to file.  Keep reading and I wish you a happy new year. 

Myth #8: I don’t Owe Enough, or I Owe Too Much to File Bankruptcy

The simple fact is that there are no limits to the minimum and maximum amounts of debt a person can have and still file for Bankruptcy.  Technically a person could file if they owed only 1 dollar, of course this would be a very bad idea when you consider the costs involved.  The Court costs alone will greatly exceed this amount, with the typical filing fee being a couple hundred dollars.  However the reality is that peoples circumstances are different and while a person making $100,000 dollars a year or more wouldn’t usually file over five to ten thousand dollars a person on a fixed income taking home less than $12,000 dollars a year almost certainly would have no other choice.  It is all relative, and recognizing this, the Congress has not placed absolute limits on debt amounts in the Code. (There are a couple of technical exceptions for very high debt amounts, but even in those circumstances they don’t prevent filing out right, they just effect the debtor’s eligibility for particular chapters of the code). 

Myth #9: I Make Too Much or Too Little to File for Bankruptcy

This myth is similar to the last one it’s all relative.  However, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 did place limits on income that can act in some circumstances to prevent high income people from selecting to file a Chapter 7 Bankruptcy, nothing precludes them from filing another form of Bankruptcy such as a Chapter 13 Bankruptcy.  I take a closer look at the Bankruptcy Abuse and Consumer Protection Act in the section of my book entitled a “Brief History of Bankruptcy,” and I deal specifically with the issues regarding Chapter Selection in the section of the book entitled “Types of Bankruptcies/Choosing the Right One for You.” 

Myth #10: If I File It Will Destroy My Husband or Wife’s Credit

Nope, nothing in the Bankruptcy Code requires a person to file with their spouse, or even tell their spouse that they are filing.  As we well know not all people are 100% truthful with their spouses about their financial situation.  I have had this issue come up at least a couple of times a year since I started doing Bankruptcy work.  The truth is it is possible to file without telling your spouse and in fact you probably will be able to prevent them from ever knowing about it, assuming they don’t pay much attention to your finances.  However I don’t recommend it.  In fact, in my practice I wouldn’t do it.  I know some attorneys who have done this type of thing but it’s really not a good idea.  That being said, I often have filed for one spouse or the other so that they can eliminate all or most of their debt and yet still have one person in the relationship with really good credit.  This technique can be quite useful in certain circumstances.  The particulars of this are a bit advanced for this book.  I would suggest that you consult a good Bankruptcy attorney who is well trained and familiar with the law before considering this type of individual filing. 

The general rule is if you don’t file it doesn’t affect your credit. This means no negative hit to the credit report, but also means that in the case of joint debts the person who files may not have to pay, but the person who didn’t file still does. 

For more information about this issue and many more buy the book. 

Bankruptcy Myths (Part 2)

Myth #5: If I File It Will Be Harder to Get or Keep a Job 

The good news is that there are strict rules in the Code that prevent this type of discrimination.  Just like it’s illegal not to hire someone based on race or religion it is also illegal to discriminate against someone in the hiring process based on a past Bankruptcy filing.  I deal with this issue and many similar issues in greater detail in the section of my book entitled “It’s Not as Bad as You Think.” 

Myth #6: You can’t Get Rid of Medical or Tax Debts?

In general most types of debt are dischargeable, meaning that you can get rid of them.  There are virtually no exceptions to this rule that result in preventing a person from discharging medical bills or medical debts.  Taxes are a bit trickier for sure but also can be discharged in the right circumstances.  This topic will be more fully dealt with in the section of my book entitled “What’s a Discharge and How does it Work?” 

Myth #7: I Should Max Out My Credit Cards Because When I File I Won’t Have to Pay Anyway 

Not so fast…This one is a big no-no.  Don’t do it, its fraud, its stealing and it just ain't right.  Seriously if you cards are maxed already ok we can deal with that, but don’t ever charge something or borrow some money with the intent not to pay it back.  It really wouldn’t be right but on top of that it’s criminal.  Not to mention the fact that you won’t get away with it anyway.  There are strict rules that prevent this type of behavior.  We will cover this and couple of other things you should avoid in the section of my book entitled “What can go Wrong and How to Avoid it.” 

For more information buy the book. 

I do have a last minute Christmas Gift Idea for those of you who know people who are either in or want to go to Lawschool.  A good friend of mine wrote an excellent book which you can purchase on Amazon.  I have included a link below. 

   

                              

Merry Christmas and a Happy New Year

I wanted to take a brief moment to reflect on Bankruptcy and the holidays.  Generally in my practice this time of year has been particularly slow.  I think that the main reason for this is that people just don't want to think about Bankruptcy and debt issues around the holidays.  While I can certainly understand this sentiment I would like to encourage you to remember that holiday spending doesn't go away after the holidays. 

Hopefully you have finished your Christmas shopping by now but if not try not to spend money you don't have.  The goal of this site is to offer advice and education to my readers but the true goal I have as an attorney is and always has been to save my clients from hassles.  The best way to solve a finical crisis is to avoid it. 

Between now and the end of the year I will publish part two and three of the section on common myths about bankruptcy. 

Good luck to you and Merry Christmas. 

Here's to a happy and profitable new year. 

And if you cant think of what to get for that last minute gift buy yourself the book

 

Buy the Book Now

                                                                 

Ten Bankruptcy Myths (Part 1)

In my book I cover a number of common misunderstandings about bankruptcy.  Below I go into some of the most common misunderstandings about bankruptcy. 

Myth #1: Only Losers File for Bankruptcy

This is perhaps the biggest myth and is probably the most common belief among the general public.  The reality is that millions of people file every year.  Many of these people are doctors and lawyers.  Many of these people are normal regular hardworking individuals.  In many cases a person is forced to file due to things completely out of their control. 

Myth #2: People Who File for Bankruptcy Lose Everything They Have

Almost every day in my practice I heard somebody say “I really don’t want to file because I need my car to get back and forth to work,” or “I need your help but I can file Bankruptcy because I can afford to lose my home, it would devastate my children.”  

The good news is that you don’t have to lose your house, cars, furniture, collectables, photo albums, jewelry, or even you dog.  In most cases, my clients have been able keep everything.  Obviously there are limits to what a person can keep in Bankruptcy, but for most people these limits are quite generous.  I cover this in much more detail in my book, "Should I File: A Definitive Guide to Bankruptcy," in the section entitled “What Can I Keep?”  

Myth #3: If I File My Credit Will Be Destroyed Forever 

Most people believe this one.  My experience is that many attorneys even believe this one.  However it is simply not true.  First of all, the Fair Credit Reporting Act specifically limits the timeframe in which a Bankruptcy appears on your credit report to ten years.  This means that ten years and one day after your discharge the Bankruptcy will have no more effect on your credit.  The good news is that there is no need to wait that long.  Many people whom I have worked with have gotten credit cards and even mortgages with a year or less after filing for Bankruptcy.  How this works and what you should do to rebuild your credit is covered in detail in my book in the section entitled, “OK I filed, What do I do Now?”

 

Myth #4: If I File All My Friends Will Find Out

 

For some reason this myth just will not go away.  Lots and lots of people whom I have dealt with have expressed fear and anxiety over people finding out that they filed.  And while we will deal with this issue in much greater detail a little later on, I think it is important for you to know that in many case in fact in most case the only people that ever find out about your bankruptcy are those people you told about it.  In fact it is very likely that someone you work with or a close friend of yours has filed and you don’t know about it.  If they can get away with it so can you.  This myth is covered more fully in my book in the section entitled “Everyone is Doing it Maybe You Should Too”

I hope that you enjoyed this preview of my book.  I will be posting more myths in a few days.  If cant wait these myths and many more are covered in my book.  for more information about my book click below.