Bankruptcy Myths

Myth: I will lose all my property if I file bankruptcy

Fact: Most debtors (the legal term for a person who files bankruptcy) filing an Ohio bankruptcy do not lose any property. The vast majority of all cases are administered as “No Asset” cases, meaning there are no assets that are both non-exempt and worth enough for the bankruptcy trustee to bother selling them to pay your creditors. If you do have a large tax refund or other non-exempt asset that may be at risk, we can tell you how best to protect that asset.

 

Myth: If I file an Ohio bankruptcy, I will never get credit again

Fact: We have had clients receive offers for credit within a week of their Ohio bankruptcy being filed!! Filing bankruptcy gets rid of debt. Getting rid of debt puts you in a position to be able to pay the bills you do have, and this makes you look more attractive to potential lenders. At first, the would-be lenders will want larger down payments than normal and will want to charge you higher interest rates. However, over time, if you are careful, and keep your job, start saving money, pay your bills, and do things that will improve your credit score, the loan terms you will be offered will improve. In my experience, if a client has not re-established good credit in 2 to 4 years after their Ohio bankruptcy filing, it’s probably not a result of their having filed bankruptcy, but rather a result of something that happened after their bankruptcy case was filed.

 

Myth: Only deadbeats file bankruptcy

Fact: The overwhelming majority of the people who file bankruptcy are good, honest, hard-working people, just like you and me. They file as a last resort, after having spent months or years struggling to pay the bills left over from some life-changing experience, such as a serious illness, the loss of a job, divorce, a failed business venture, or because they honestly and mistakenly fell into debt at a young age before they knew better. Additionally, most of the clients I see for bankruptcy have taken many steps to try to avoid having to file bankruptcy, including taking out second mortgages and making withdrawals from their retirement plans (neither of these are advisable in most cases, however!) before coming in to even consider filing an Ohio bankruptcy.

 

Myth: There is a minimum amount of debt required to file bankruptcy

Fact: There is no minimum amount of debt that a person must have to file an Ohio bankruptcy. Practically speaking, the amount of debt you have must be looked at in relation to how much money you make.               For a person with little or no income, it may make sense to file an Ohio bankruptcy with a relatively small amount of debt, where someone with higher income would find that amount of debt to be manageable. For example, $10,000 in debt is unmanageable to someone who is making $1,500 a month, but that same amount of debt would probably be manageable for a couple bringing home $8,000 per month.

 

Myth: I only have to list the debt I want to get rid of in my bankruptcy.

Fact: All debt must be listed, including debts owed to personal friends and family, business partners, debts you want to repay in the future, etc. You can reaffirm (agree with the lender to continue paying) debts such as your home, car(s) and other secured loans. You can also simply make voluntary payments to family or medical providers after your bankruptcy filing, if you wish. Note however, that it is important to not repay these debts right before filing an Ohio bankruptcy or while your case is pending, without discussing this with your attorney!

 

Myth: I can max out my credit cards just before filing bankruptcy.

Fact: Debt acquired after you know you cannot repay your debts will likely have to be paid back even though you have filed an Ohio bankruptcy.  Doing this is considered fraud, and is a big no-no! It is important to discuss this issue with your bankruptcy attorney if you have recent credit card usage.

 

Myth: If you are married and file bankruptcy, your spouse must file too.

Fact: Many married debtors file alone and the non-filing spouse is not affected. At your consultation, we will look at whether the debts are primarily in just one spouse’s name or whether they are in both spouses’ names – often times this is not as easy to figure out as you might expect. From there, we can give you our opinion as to whether your filing should be an individual or a joint filing. Keep in mind that even if only one spouse is filing, we will still be required to take a look at the income of the non-filing spouse. This does not include the non-filing spouse in the bankruptcy in any way and his or her name will not appear on the bankruptcy paperwork.

 

Myth:               You can’t discharge taxes in bankruptcy.

Fact: Contrary to common misperception, income taxes can generally be discharged in an Ohio bankruptcy provided that:

  1. The taxes are at least three years old,
  2. the tax returns were filed at least two years ago,
  3. any assessment was more than 240 days ago, AND
  4. you did not engage in any type of fraud or tax evasion.

Real estate property taxes are not discharged if you are keeping the property. In that case, arrangements will need to be made to bring those taxes current. Sometimes, this is done by filing a Chapter 13 Ohio bankruptcy, which gives you 3-5 years to catch up your past due taxes. If you are surrendering your real estate (giving it back to the bank), then the taxes will be the first thing paid when the bank sells the house, so if you are surrendering your home, do not pay any more property taxes!

 

Myth:               Everyone will find out I filed for bankruptcy  

Fact:               The names of the people who have filed is all public record, but, practically speaking, it is very unlikely that anyone would ever just stumble across this information. There is, however, another way that people might find out about a bankruptcy filing. Everyone you owe money to must be listed on your bankruptcy papers and will receive notice from the court that you have filed. This means if you have an account at the local hardware store, for instance, they have to be listed on your paperwork and they will get a letter from the court stating that you have filed bankruptcy. If a bill is very small, sometimes clients will decide to pay the bill before we file the case so that notice will not have to go to that local creditor, but for larger balances, this may not be an option.

 

Myth: My creditors will not stop calling me even if I file bankruptcy.

Fact: The Bankruptcy Code offers something called the “Automatic Stay” to people who file bankruptcy.  This Stay, as it is referred to, goes into effect as soon as your case is filed. It prohibits your creditors from calling you, sending you letters, garnishing your wages, or levying your bank account (taking money out without your permission).  If a lawsuit has been started against you, it freezes that litigation in it’s tracks. If a foreclosure is pending, it is stopped at whatever stage it is at. This Stay is designed to give you some breathing room, free from the harassment of creditors, to allow you to figure out how to proceed with your financial situation.  Once we file your Ohio bankruptcy, your case will be assigned a case number. If any creditors contact you, you will just give them the date your case was filed, the case number, and our phone number and tell them to call us with any questions. Clients often related back to us that they have a sense of peace and calm once their case is filed and the phone finally stops ringing all hours of the day and night from creditors.

 

 

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 Requires the following notice: We are a Debt Relief Agency. We help people file for bankruptcy relief under the Bankruptcy Code. This web site is not an offer to provide bankruptcy assistance services to any assisted person as defined under Section 527(a)(2) of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.