Myth #1
You will lose everything you own.
FALSE! Bankruptcy allows you to keep most if not all of your property. Outside of bankruptcy you could lose your property to creditors, but once you have filed for bankruptcy you and your property are protected. Laws that allow you to keep property are based on the California Code of Civil Procedure in California applicable to Federal Bankruptcy Law but vary from state to state. Bankruptcy can remove judgement liens from your property. Bankruptcy also allows Debtors to do a "cram-down" to reduce the property to market value and pay it off in 5 years with no interest or late fees. This does depend on your circumstances and income.
Myth #2
I make too much money to file for Bankruptcy.
Depends. The Bankruptcy Reform Act of 2005 changed the method in which Debtors qualify for. The different types of bankruptcy. It does not prevent people from filing bankruptcy and in most situations people are still able to get the same relief now as they were able to get before {he law changed. This is why you need to go with an experienced and seasoned attorney who knows how to use the "means test" for your benefit or knows pre-petition planning to get you qualified to file a Chapter 7. There are rare situations where a debtor's income is too high and are only eligible to file a Chapter 13 bankruptcy.
Myth #3
You can't discharge taxes in bankruptcy.
Depends. You can discharge income taxes that are more than three years old by filing a bankruptcy. There are several factors which effect the Dischargeability of taxes, but you still have the ability to discharge a portion and make a payment plan on the balance. In addition, certain taxes must be paid and cannot be discharged by filing bankruptcy but could be paid back through a Chapter 13 or 11 without interest, late fees and penalties.
Myth #4
Filing for bankruptcy hurts your credit for 10 years.
False. Bankruptcy does stay on your credit report about 7 to 10 years. Although the bankruptcy will stay on your credit, the 3 credit reporting agencies are now required to zero ($O.OO) out the balances owed showing on your report. This applies to good and bad credit. However you can start rebuilding your credit once your bankruptcy is discharged because your debt to income ratio will have changed significantly. Making current payments on your secured debts or new and secured credit cards are some ways to start rebuilding your credit after your discharge.
Myth #5
It's too difficult to file for bankruptcy.
False. Although there is a lot of paperwork involved, and decisions involving exemptions and rules to follow, having a skilled attorney like Stephen Darrow makes the process much smoother. Filing bankruptcy is now filed electronically these days, which minimizes paperwork on your part. On our side, petitions for bankruptcy average 52 to 65 pages of detailed information that needs to be sufficiently accurate to satisfy the court and United States Trustee's office which oversees all bankruptcy filings. Choosing a well versed attorney who has been practicing in Bankruptcy for several years to assist you in the paperwork is essential to ensure you choose the correct exemptions and the paperwork is filled in correctly so you will not lose any of your property or assets.
Myth #6:
You can pick and choose what to put onto your bankruptcy.
You can pick and choose what to put onto your bankruptcy.
False. You must list all of your debts that are owing. Remember you are filing Bankruptcy to protect your assets from creditors so you need to provide your attorney with everything you own and owe. You must also list all the property that you and your spouse owns. You cannot discriminate between creditors, even if you want to keep paying them. There are no restrictions to stop you, if you want to continue paying any creditor but it is still mandatory to include all your debts.
Myth #7:
You will never be able to own real property again.
You will never be able to own real property again.
False. You actually will receive credit card offers and be extended credit almost immediately after the discharge of your bankruptcy. There are also creditors that will extend credit to you while you are still in bankruptcy. The Darrow Law Center can assist you, after bankruptcy, in financial counseling after your discharge to enable you to purchase whatever you can afford.
Myth #8:
Everyone will know I filed for bankruptcy.
Everyone will know I filed for bankruptcy.
False. Although Bankruptcy is of public record, unless you are a celebrity or a prominent official in society, people are not going to go looking for who filed for Bankruptcy. Most Bankruptcy filers are not published in any newspaper and the only people who are going to know you filed are your creditors and those who you personally tell, unless a person has obtained an account to be able to access the bankruptcy court's record system.
Myth #9:
Both you and your spouse have to file bankruptcy together.
Both you and your spouse have to file bankruptcy together.
False. You can file together or separately, that is your choice. In fact, current case law has determined in California, as a Community Property State, if one spouse files Bankruptcy both the husband and wife are entitled to the discharge benefits even though both did not file the bankruptcy. Also, there may be some circumstances where one spouse might not want to file, which is allowed by the court. The consequences may different in different states, which have different community property laws, however all assets of both must be listed in the petition.
Myth #10:
You are a bad person for filing bankruptcy.
You are a bad person for filing bankruptcy.
False. There is a reason that over one million people file for bankruptcy each year and it is not because they are bad people. Bankruptcy is a solution to help good people who are going through a bad time or difficult circumstances. It provides people to obtain a fresh start on their financial Life that they were not able to obtain because of the debt burden. Some very famous people have filed for Bankruptcy, several presidents have filed bankruptcy along with Walt Disney and some of Donald Trump's Corporations and have rebuilt their empires now known worldwide. You are actually acting responsibly by filling a bankruptcy, because you are acknowledging your financial problems and taking action to cure the problem.
Myth #11:
You can only file bankruptcy once.
You can only file bankruptcy once.
False. You can file for bankruptcy as many times as you like. Although, you are limited by how often you can receive a discharge. You can receive a discharge from Chapter 7 once every 8 years. You can receive a discharge from Chapter 13 every 2 years. If you get discharged in a Chapter 7 you will have to wait 4 years before obtaining a discharge from a Chapter 13. If you get a Chapter 13 discharge then you need to wait 4 years to obtain a discharge from a Chapter 7. However, there is no waiting period if your case is dismissed. You can file back to back should you choose.
Myth #12:
You can never get credit again.
You can never get credit again.
False. You can start establishing new credit from the day you file. Bankruptcy wipes out your past debt, which in turn helps your credit score. By making timely payments on the secured property debt that you choose to keep also starts establishing a record of good credit. You will be able to get credit as soon as your bankruptcy is discharged and sometimes sooner. Most lenders on houses require a waiting period of 1 to 2 years before qualifying debtors to purchase a new house.
Myth #13:
Only losers file for bankruptcy.
Only losers file for bankruptcy.
False. The government has established Bankruptcy laws in order to ensure that people in financial trouble do not go homeless and broke. Bankruptcy was established as a means for good people who are going through bad times to get relief. Many times, people have to file because they have lost their job, gone through divorce, or experienced medical illness. Bad times don’t make a person bad. Bankruptcy can provide the relief that people need to get themselves out of the bad times and debt free without the nagging phone calls. In fact, Walt Disney filed for bankruptcy, some of Donald Trump's Corporations, airlines, major stores and restaurants have sought bankruptcy relief.
Throughout history, many famous people have had to file Bankruptcy or deal with overwhelming debt problems, including "Wolfgang Amadeus Mozart" and "President Thomas Jefferson".
Recently, celebrities who have filed Bankruptcy include musician "Elton John", actress "Kim Basinger", "Sherman Hemsley" from "The Jeffersons," "Gary Coleman" from "Different Strokes," former teen idols "Cory Haim" and "Cory Feldman", "Rapper MC Hammer", actor "Burt Reynolds" of "Smokey and the Bandit," Las Vegas entertainers "Wayne Newton", "Jerry Lewis", "Mickey Rooney", and even former Treasury Secretary "John Connally", whose signature still appears on our currency.
Throughout history, many famous people have had to file Bankruptcy or deal with overwhelming debt problems, including "Wolfgang Amadeus Mozart" and "President Thomas Jefferson".
Recently, celebrities who have filed Bankruptcy include musician "Elton John", actress "Kim Basinger", "Sherman Hemsley" from "The Jeffersons," "Gary Coleman" from "Different Strokes," former teen idols "Cory Haim" and "Cory Feldman", "Rapper MC Hammer", actor "Burt Reynolds" of "Smokey and the Bandit," Las Vegas entertainers "Wayne Newton", "Jerry Lewis", "Mickey Rooney", and even former Treasury Secretary "John Connally", whose signature still appears on our currency.
Myth #14:
Creditors can still harass you if you file for bankruptcy.
Creditors can still harass you if you file for bankruptcy.
False. When the bankruptcy is filed, automatic protection goes into effect protecting you and all of your property instantly from creditors including the I RS. Creditors are prohibited from contacting you for any reason which includes calling or even billing you, if you have an attorney. If they persist in harassing you, you do have remedies available through the Federal Bankruptcy laws.
Myth #15:
Filing bankruptcy causes more family trouble and divorce.
Filing bankruptcy causes more family trouble and divorce.
False. Bankruptcy removes debt, which eliminates financial stress and disruption of the family household. Filing bankruptcy is the solution to the problem, not an additional problem. Although making the decision to file bankruptcy might be difficult one, the relief provided will lift a huge burden off of you. The absence of financial stress will give your relationship a fighting chance.
Myth #16:
I will lose my rental properties if I file for bankruptcy.
I will lose my rental properties if I file for bankruptcy.
False. Bankruptcy law can assist the investors in removing the second trust deeds on rental properties (through a lien strip) and/or reduce the first trust deeds to market value through a "cram down”) through a Chapter 11, 12 or 13. If your properties are upside down you still have the choice to keep them after a Chapter 7 bankruptcy, but you still need to make payments on them.
Myth #17:
I will still have to pay all my mortgages even though I filed for bankruptcy.
I will still have to pay all my mortgages even though I filed for bankruptcy.
False. Bankruptcy law can assist homeowners to remove the second and third trust deeds on their principal residence through a lien strip through a Chapter 11, 12 or 13 if the market value and loans are within certain financial criteria. Your primary mortgage or first trust deed will still need to be paid if keeping your residence.