Ten Common Myths About Bankruptcy
At the Law Offices of Neil Crane, we understand that there are a lot of bankruptcy myths that prevent people from seeking the help that they need. Here are some of the most common myths that we hear, and our responses to set the record straight.
MYTH #1: Assets Are Lost During BankruptcyAll Bankruptcies are filed to protect assets from creditors.
A properly filed case will not result in any loss of assets. Bankruptcy law protects homes and personal belongings through liberal “exemptions” or allowances for assets that are protected for you and necessary to your fresh start. Bankruptcy is filed to protect what you own and get rid of what you owe. Homes, automobiles, personal belongings, furniture and other assets are protected by bankruptcy law, including all pensions and all forms of IRAs up to $1 million along with cash of up to $14,000+/- per person. These assets are protected from your creditors so you can restart and rebuild your family’s future.
MYTH #2: Bankruptcy Will Cause You to Lose Your Home or Your CarBankruptcy stops all lawsuits and prevents foreclosure and repossession.
All debt collection actions in any state or court in the country are immediately stopped by a bankruptcy filing, including repossessions, lawsuits, foreclosure, and attachments. Bankruptcy under any chapter protects all of your assets immediately upon filing. The automatic stay of bankruptcy takes effect immediately after filing for bankruptcy, stopping the foreclosure process, preventing collection actions and stopping harassment from creditors.
MYTH #3: Bankruptcy Will Ruin My Credit ScoreThe effects of filing bankruptcy on credit score is a myth. The true result of bankruptcy on credit score varies for all individuals, depending on their individual circumstances. For people with bad credit scores, it only serves to improve their score through a clean slate. All people with high debt, even perfect payers, already have falling credit scores because of their high credit card burdens and its effect on FICO scores. High utilization is now 35% of all credit scores. People with mediocre credit will likely experience a small falling score initially with a bankruptcy filing, but will then be able to earn a higher and rising score above and beyond their initial filing score. In fact, bankruptcy can be the first and best step to achieving a solid and excellent credit score.
Credit Scores and Bankruptcy: You can begin rebuilding your credit score and obtain credit cards immediately after filing for bankruptcy.
Creditors love to extend credit to post-bankruptcy clients. They have good income, reduced debt, or no debt at all. Even though you can borrow money again right away, it pays to be careful. Credit after bankruptcy has become too easy – we make sure you are thoroughly educated about the advantages of good credit and the dangers of new debt.
MYTH #4: I Won't Be Able to Get a Mortgage or Loan After BankruptcyMortgages after Bankruptcy: You can still obtain a mortgage or an auto loan after filing for bankruptcy.
Re-establishing credit after bankruptcy is not like it used to be. Credit cards and car loans are quickly available at good rates within months of a Chapter 7 bankruptcy. By restarting with a limited amount of credit, and staying current on post-bankruptcy payments, bankruptcy actually improves your credit worthiness by ending defaults, reducing unmanageable debt loads and improving your family’s debt-to-income ratio. With good practices, a mortgage should be available to clients post-bankruptcy without a co-signer three years or less. Now more than ever, bankruptcy, followed by sound financial practices, rebuilds credit and allows for manageable financial obligations and high credit scores.
MYTH #5: Bankruptcy Takes a Long TimeBankruptcy is a quick process completed with no court appearance that should take a month or less - Some cases can be fully completed in a few days.
MYTH #6: Bankruptcy is Only for People Who Aren't ResponsibleFiling Bankruptcy is a federal right granted to all U.S. citizens.
Filing for bankruptcy is not taking the easy way out. Most clients wait far too long to seek help. For people who need to file for bankruptcy, it is an alternative provided to you under federal law. You have the right to create a financial fresh start and obtain relief from creditors and unmanageable debt problems. Unregulated banks and lenders with excessive interest payments and fees have become a danger to all hard-working middle-class Connecticut residents. Bankruptcy is created for the protection of middle-class Americans at risk.
Bankruptcy clients and middle-class consumers are some of the hardest working families in America. Some have made mistakes, but all have worked hard to solve those mistakes. For many middle-class Americans, the only protection left is bankruptcy law, and under that law, you have a right to relief and a fresh start.
MYTH #7: I Can File Bankruptcy On My OwnDon't file on your own. Improper Chapter 7 bankruptcy filings can't be withdrawn, and Chapter 13 bankruptcies require specialization and experience to be successful. A properly qualified and experienced bankruptcy attorney is necessary to assure your success.
The bankruptcy system works, but it isn’t easy. It takes experienced counsel and practiced expertise. Reliance on the assurances of non-qualified “experts,” out-of-state companies or “friends” can seriously jeopardize your chances of successfully finding debt relief. The knowledge and experience of a highly qualified attorney are the key to presenting your case effectively, resolving your debt problems in a customized manner specific to your precise legal and financial problems. This is a highly specialized area of the law. Your future is too important to trust to anyone other than a true local bankruptcy attorney with a long track record of resolving financial issues for people just like you.
MYTH #8: Bankruptcy Lawyers Only Do Bankruptcy CasesBankruptcy lawyers understand and practice all the options for debt relief. We can do debt settlement and other negotiations to resolve outstanding debt as well as negotiating lawsuits and stopping debt collectors from harassing you. Harassment from creditor phone calls and mailings can become very stressful and detrimental to your recovery as well as threaten your livelihood. Experienced Bankruptcy attorneys can stop all harassment and prioritize your needs into a plan for sound debt relief of any type, depending on your particular individual needs.
MYTH #9: Creditors Will Stop Harassing Me if I Don't Answer Their CallsCreditors Will Not Stop Until You Show Them You Are Serious.
Creditors tend to violate the law because few people ever complain about their tactics. People with debt often are made to feel that they have no rights or protections. The fact is, creditors often violate the law, even though there are numerous federal and state consumer laws designed to protect you.
Our professionals know how to negotiate with creditors and put an end to overwhelming collections and legal actions efficiently and effectively. Effective debt relief or any bankruptcy plan starts with immediate relief from creditor calls and a specialized plan for a financial fresh start. We take every creditor call for every client by hand. We never use voicemail, so they’ll never call you back.
MYTH #10: Everyone Will Hear About My BankruptcyYou have a right to privacy. Your taxes, Social Security Number and financial information are private and confidential. The Federal Court system protects bankruptcy filings and access to confidential financial information. The only one who will follow your bankruptcy filing is you.
Know Your Options; Choose WiselyEveryone has very understandable and obvious reservations about filing for bankruptcy. But in many cases, it is the correct option that provides any true solution. Understand all the options. Your knowledge is power. Often bankruptcy is a hard choice but it is the right solution. Thankfully, we still have a Bankruptcy System that respectfully protects the middle class and its right to a path for financial recovery.