Proven Partners For Financial Health

Bankruptcy Mythology 101

Bankruptcy is a complicated and often misunderstood process. Too many people fall victim to false information and end up hurting themselves, and sometimes their family, by engaging in unfortunate behavior – before, during, and after filing for bankruptcy.

At Gudeman & Associates, P.C., we believe that you need truthful, honest and correct information about your bankruptcy options and alternatives. With this in mind, here are some common myths we dispel so that you make informed decisions.

Myth No. 1: You Can No Longer File For Bankruptcy

In 2005, various changes were made by Congress to existing bankruptcy laws. While these changes included increased stipulations for those wishing to file Chapter 7 or Chapter 13 bankruptcy, it did not make it impossible for individuals to file for bankruptcy. Contrary to what you may have heard, it is still possible to file for bankruptcy in southeastern Michigan and throughout the United States. In fact, the new law has actually increased certain benefits for some individuals filing for bankruptcy — find out more about your various bankruptcy options by contacting our firm today for a no-obligation consultation.

Myth No. 2: All Your Family Members, Friends And Co-Workers Will Know You Filed For Bankruptcy

For the vast majority of people, this is simply not true. Unless you are famous or are involved with a very well-known business, chances are, no one but your creditors and the people you tell will know that you have filed for bankruptcy. Though bankruptcy filings are public record, it’s very unlikely that anyone would take the time to investigate whether or not you have filed. The best way to avoid having friends, coworkers, or family members find out that you have filed for bankruptcy is to simply not tell them.

Myth No. 3: Filing For Bankruptcy Will Result In Losing All Your Property

In fact, most of our clients don’t lose any of their property after filing for bankruptcy. Depending on your unique situation and the type of bankruptcy you file for, it’s very likely that you will be able to retain most, if not all, of your property, including your house, vehicles, retirement savings, household goods, and more. In the state of Michigan, a “wildcard” exemption even allows you to apply $11,400 per person to anything you want. Filing for Chapter 13 bankruptcy offers individuals the opportunity to retain their property in the rare circumstance that they do not qualify for available exemptions. In these instances, you must continue making payments on your debt in order to keep your property. An experienced bankruptcy attorney can help you determine which type of bankruptcy is right for you.

Myth No. 4: Bankruptcy Means You Can Never Own Anything Again

While many people believe this bankruptcy myth, it is completely false. Bankruptcy is intended to give individuals a fresh start, one that includes the future ability to own a house, car, and other property that you owned before filing. Once you receive your discharge in bankruptcy, or, in other words, you are no longer legally responsible for your debts, you are allowed to own any property or possessions you can afford.

Myth No. 5: After Filing For Bankruptcy, You Can Never Get Credit Again

Despite common belief, it is possible to qualify for credit after filing for bankruptcy. In fact, it is actually more likely that you will qualify after filing than if you don’t file at all. This is because bankruptcy eliminates your current debt, making way for new credit and new debt. Credit card companies and banks typically begin sending credit offers fairly quickly after you are discharged from debt, as they see you in a more attractive light when your old debts are gone. At Call, we advise you to tread carefully with these new offers. Usually, they contain very high interest rates and can soon put you right back in the same situation you found yourself in before filing for bankruptcy. If you are careful and make all of your payments on time, you can begin rebuilding your credit relatively quickly after filing for bankruptcy.

Myth No. 6: Filing For Bankruptcy Means You Are A Bad Person

While many people fear bankruptcy, viewing it as a personal failure, filing for bankruptcy does not mean you are a bad person. In fact, choosing to file simply means that you are taking action, exercising your constitutional rights, and regaining control over your finances and your future. More than a million families file for bankruptcy in the United States every year, often due to circumstances beyond their control. Medical emergencies, unexpected layoffs, downturns in the economy, unsuccessful business, and more all lead to overwhelming debt. By filing for bankruptcy, you are putting your financial security and the future of your family first.

Myth No. 7: Bankruptcy Your Credit For 10 Years

This is a common misunderstanding regarding the effects of bankruptcy. While it is true that bankruptcy is reported on your credit for 10 years after filing, it does not mean that your credit is damaged for the same length of time. Usually, people filing for bankruptcy already have damaged credit due to being unable to make minimum payments on their debts. Filing for bankruptcy cannot damage your credit more. If, after filing, you begin to pay all of your bills on time, you will slowly but surely begin rebuilding credit. Most of our clients find that they have substantially rebuilt their credit after as little as two to four years.

Myth No. 8: Both Spouses In A Marriage Must File Bankruptcy

It is not necessary for both spouses in a marriage to file for bankruptcy. At Gudeman & Associates, P.C. we have helped hundreds if not thousands of married individuals file for bankruptcy, even if their husband or wife did not file as well. There are certain circumstances where it might make the most sense for both spouses to file; however, there are many instances in which only one person needs to file for bankruptcy. Our skilled bankruptcy lawyers in Royal Oak and southeastern Michigan can help you and your spouse understand your options and determine the best route for your specific situation.

Myth No. 9: Filing For Bankruptcy Is Very Difficult

While it is true that bankruptcy is a complex process, filing for bankruptcy is not difficult with the help of a skilled attorney. Our experienced team of lawyers, paralegals, and legal assistants can help you navigate the process. Call the firm today to schedule your no-obligation consultation!

Myth No. 10: Creditors Will Still Harass You Even After You File For Bankruptcy

As soon as you file for bankruptcy, the Bankruptcy Court orders an “automatic stay” which prevents creditors from contacting you in any way. The automatic stay stops creditor harassment instantly —creditors are not allowed to call, write, or talk to you, and they must cease any collections processes that are in motion or soon to be in motion. Creditors who violate the order can be heavily penalized, making it very unlikely that they will do so.

MYTH #11: FILING FOR BANKRUPTCY LEADS TO FAMILY TROUBLES

Every family is different, and filing for bankruptcy will not automatically lead to problems with your family members. Many people fear that bankruptcy will lead to separation, divorce, or considerable familial strain. In fact, our clients often find that the opposite is true. Once you have chosen to file for bankruptcy, the stress of relentless creditors and mounting debt vanishes. You are better able to provide for your family and feel the security that comes from taking action to regain control over your finances and your future.

Myth No. 12: Bankruptcy Does Not Get Rid Of Back Taxes

Often, bankruptcy does eliminate income taxes that are more than three years old. At Gudeman & Associates, P.C., we have helped many clients get rid of these old taxes. We can help you determine if you meet the certain requirements needed, and will help you map out your options for eliminating back taxes.

Myth No. 13: You Cannot File For Bankruptcy Multiple Times

This is absolutely not true — you can file for Chapter 7 bankruptcy once every eight years. If you have already filed Chapter 13 and received a discharge, you may file Chapter 7 after six years. If you wish to file a Chapter 13, you may do so four years after a discharged Chapter 7 or two years after another discharged Chapter 13. If you filed bankruptcy before and it was “dismissed” as opposed to discharged, there is typically no waiting period between filing.

Myth No. 14: You Can Choose Which Debts And Property To List In Your Bankruptcy

By law, you must list all of your property and debts when filing for bankruptcy. Many people intend to pay debts back after filing for bankruptcy, and therefore wish to leave these out when filing. However, even though you must list all of your debts, you can still pay back any debts you wish to after filing for bankruptcy. If you want to keep you home, car, or other property, you will most likely be able to do so, as long as you stay up to date on your payments and keep the property insured. If you take these steps, the creditor cannot take your property back.

Myth No. 15: You Must File For Bankruptcy On Your Own

Contrary to what many people think, you do not have to take on the lengthy and complicated process of filing for bankruptcy on your own. In fact, an experienced bankruptcy lawyer in Royal Oak or the nearby areas can simplify the process by helping you determine the best solution for your situation. At Gudeman & Associates, P.C., we have helped hundreds of clients navigate the bankruptcy process, offering open communication and experienced legal guidance. Whether you are considering filing for Chapter 7, Chapter 11,Chapter 12, Chapter 13, or are looking to consider some alternatives to bankruptcy, we are here to help.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.