Bankruptcy from A to Z – 7 Assumptions You Need to Rethink

If you’ve done a little research about bankruptcy on the internet, you’ve probably read some things you’ve assumed to be true. You also probably know the old saying about assuming. With that in mind, here are seven assumptions you may need to rethink.

1. I make too much money to file bankruptcy

It is possible that you make too much money to file a chapter 7 bankruptcy case, but in most situations, an individual will qualify for a chapter 13 bankruptcy filing.  However, I’ve had individuals who’ve made more than $90,000 per year qualify for a chapter 7 filing so if you want to file chapter 7, be sure and have a skilled bankruptcy attorney review your situation!

2. I will lose everything I own if I file bankruptcy

Nothing could be further from the truth.  Most of my clients who chose to file a chapter 7 bankruptcy case lose NOTHING. That’s right. Through a combination of exemptions and proper analysis of your situation, we can greatly reduce the likelihood of losing any property.

3. I can pick and choose the debts to file bankruptcy on

When you decide to file a bankruptcy case, you must include all debts, even the one to Uncle Joe. That said, I always explain to my clients that you are also always allowed to voluntarily pay back any debt you choose. So just because you discharge Uncle Joe’s loan, you may repay him if you choose.

4. I need to get assets (houses & cars) out of my name before filing bankruptcy

There are several reasons not to make any transfers of property when considering a bankruptcy filing. First it could be considered fraudulent and the bankruptcy trustee could undo the transfer. If that happens you won’t have the use of your exemptions to protect the property.  Secondly, as I mentioned above, you more often than not can use bankruptcy exemptions to protect your property in a bankruptcy case.

5. I have to repay all my debts in bankruptcy

If you believe you must repay all or some of your debts, then you are probably thinking about a chapter 13 bankruptcy case. Often, a chapter 13 case is the best type of case to file, but not always. If you choose to file a chapter 7 bankruptcy case, you generally don’t repay debts.

6. I don’t have to repay any debts to file bankruptcy

Even if you file a chapter 7 bankruptcy case, you will still have to continue to pay for your house and cars if you wish to keep them. And if you file a chapter 13 case, by definition, you will be repaying some portion of your debt.

7. People who file bankruptcy don’t want to pay their bills

I don’t think I’ve ever consulted with a client who didn’t wish they could repay their bills. The simple fact of the matter is that life happens and circumstances change.  That’s why bankruptcy laws exist – to help you when you need it the most.

Photo by Moose.Boy

by Rick Palmer

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