LEGAL GUIDE
Written by attorney Karen Tallent Munzer

Some Surprising Bankruptcy Facts

Many people are confused about bankruptcy. Some of the following information may be surprising. This Guide will educate with some interesting information about bankruptcy.

  1. EVEN RICH PEOPLE FILE FOR BANKRUPTCY. Even if people are not wildly spending their money bankruptcy can happen. Even conservative businesses can take a hit in this economy. All it takes is one or more big customers suddenly not being able to pay their accounts. The business will then not have money to pay its creditors. If someone's wealth is tied up in their company, or they have personally guaranteed business loan, the business can lose everything.

  2. SOME OBLIGATIONS WILL NOT BE ELIMINATED BY BANKRUPTCY. Some debts like student loans, or obligations for child support or alimony will not be eliminated.

3. IF YOUR HOME IS UNDERWATER THE TRUSTEE MAY NOT INCLUDE IT IN YOUR BANKRUPTCY. The trustee in charge of your case may not want to liquidate the home, in which case the debtor gets to keep it. Having the home in a bankruptcy may not be necessary.Most states have homestead exemptions, which allow the homeowner to keep the primary residence if their equity is below a certain threshold. All states are different.

  1. YOUR CREDIT SCORE CAN ACTUALLY IMPROVE IN TIME. Credit can improve in time. Although a bankruptcy stays on the credit report for 10 years, you can keep a perfect payment history after a bankruptcy, and increase your credit score. However even with a decent credit score, many credit card companyies will not issue a credit card until the bankruptcy comes off the report. A higher credit score will enable qualification for a car loan or even mortgage, even with bankruptcy on your report. It will take some time to do this though.

  2. BE CAREFUL OF DEBT SETTLEMENT FIRMS.

  3. TRY TO SAVE UP BEFORE YOU FILE. Attorneys can charge up to $2000 to file paperwork and deal with trustees in bankruptcy. Some bankruptcy attorneys will take payment plans, most don't. Therefore, you might be in the position of having to go deeper into debt to pay for a bankruptcy.

  4. BANKRUPTCY IS NOT THE END OF THE WORLD. The time leading up to bankruptcy can be some of the most stressful time in your life. Many feel guilty,without work, without worth, and generally feeling down about oneself. Do not beat yourself up. There is a light at the end of the tunnel and a new beginning.. Most people feel a tremendous relief from stress after all the paperwork is done, and wish that they had filed sooner.

Additional resources provided by the author

Southern District of Florida Bankruptcy Court website

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