Top 5 Myths about Filing for Bankruptcy
Sadly, there is more misinformation available to consumers on why not to file for bankruptcy that the benefits of this powerful debt resolution tool. Read more about the 5 Top Myths about filing for bankruptcy protection in Michigan.
Myth #1 Filing for bankruptcy will ruin my credit.
This is probably the biggest myth and misperception about the various bankruptcy options. Receiving debt relief through either Chapter 7 debt elimination or through filing Chapter 13 debt consolidation will help positively influence 65% of your credit score component (recent payment history and debt-to-income ratio). The majority of our clients see an increase in their credit score within the first year of their discharge because they have fixed the issues that were dragging down their credit score – mainly late or missed payments and overwhelming debt relative to ability to pay.
Myth #2 I am married so my spouse will be forced to file bankruptcy too.
Both spouses are not required to file bankruptcy. In some cases it makes sense for couples to file jointly and in some cases the financial issue can be resolved with just one person filing. We help our clients make this determination at the initial free consultation. The main factor for Chapter 7 bankruptcy is whether the debts are held jointly or just mainly in one spouse’s name. For Chapter 13 reorganization, we look at joint debt in addition to what asset(s) we are trying to protect. For instance in the case of a home foreclosure, only one spouse who is on the mortgage needs to file to stop a foreclosure sale and get court protection.
Myth #3 If I file bankruptcy, I will lose everything.
This is also a big misperception. We carefully look at all assets and income before filing a case. For Chapter 7, the law allows us to protect assets up to certain dollar amounts with exemptions. If your assets and/or income are over what is permissible or what can be legally protected, we would simply evaluate how to resolve the debts under a Chapter 13 reorganization plan instead.
Myth #4 I can’t afford the attorney fees to file for bankruptcy.
We understand that circumstances might make it challenging to pay an attorney to assist with a bankruptcy filing. That is why we offer payment plans to help ease the cost of any fees associated with filing. In the case of a Chapter 7 Bankruptcy, the attorney will typically tell clients to stop making payments on unsecured debts and just put those funds towards filing the Bankruptcy. We also can be retained for a small deposit and will begin work immediately by fielding calls from your creditors. In the case of a Chapter 13 Bankruptcy, most often we take our entire attorneys fees throughout the repayment plan and just the court fling fee is due upfront. For most people this doesn’t increase their plan payment, it just means that a lower dividend goes to the pool of unsecured creditors. This can be explained further at the initial complimentary consultation.
#5 I won’t qualify to file for bankruptcy.
Many people come to us worried that they won’t qualify because they had a previous filing or feel they make too much money. The reality is that you will most likely qualify for one of the two consumer bankruptcy options. If you make too much money or had a previous Chapter 7 case filed within the last year, you are eligible to file for Chapter 13 immediately. If you don’t make enough money to protect your assets under a Chapter 13, we can investigate filing a Chapter 7 fresh start to help free yourself of the debt that is no longer affordable.
In conclusion, you may have been surprised by one or more of the dispelled myths we have highlighted. Unfortunately there is a lot of misinformation about what it means to file for bankruptcy and what some of the benefits might be for your finances. That is why we spend time educating our clients and our community of the potential benefits of legally resolving debt and creating a positive financial future. Call us today at 866-261-8282 for a free consultation or schedule a consultation online.