Like most life-altering decisions we have to make, filing for bankruptcy has a reputation filled with inaccuracies that make it a frightening choice. Knowing the truth can eliminate any fear you may have if you are considering bankruptcy protection and the following are some of the most common misconceptions and myths.
Myth: I will lose everything I own if I file for bankruptcy.
Fact: The fact is that most people are able to retain much of their property after filing bankruptcy because their assets are exempt pursuant to the bankruptcy code. The goal of bankruptcy is to protect you and your assets and in approximately 95% of the Chapter 7 cases, nothing is lost. In the remaining 5%, before going into the process the debtor will know the property they will be required to surrender to the secured creditor. Laws vary from state to state but Florida has one of the best homestead exemptions in the country. Although most people are able to keep most of their property, it is not an automatic condition and because laws are complicated, it is vital that you speak with an experienced bankruptcy attorney regarding your options.
Myth: When I file for bankruptcy, I will lose my 401K.
Fact: In almost all cases, you will be able to keep your 401(k) if the retirement plan is an ERISA qualified plan. The Employee Retirement Income Security Act of 1974 (ERISA) plans are protected according to Florida exemptions.
Myth: If I file for bankruptcy, my credit will be damaged for ten years.
Fact: Most people will see their credit score increase in the years following bankruptcy. The actual filing will stay on your credit report but if you keep your bills current and make sure the information they have is accurate, you will see improvement on your credit score in as little as two years. Because of the client’s debt reduction, many report that they have an easier time obtaining credit without so many outstanding balances.
Myth: I am unemployed so I do not need to file bankruptcy because my debts are uncollectible.
Fact: In the state of Florida, a creditor can sue a person for a bad debt for five years and collect for another twenty years and bankruptcy is a way to protect you from continuous harassment.
Myth: I will never be able to get another credit card or loan after I claim bankruptcy.
Fact: Many people mistakenly believe that they will not be eligible for any type of credit after filing for bankruptcy but in most cases, the opposite is true. Once debts have been discharged for a period of time, the process of credit restoration can begin. It has been determined that a bankruptcy may actually help your credit in the future, thus making it easier for you to get a loan. Studies indicate that in some cases, clients receive credit card offers in the mail only two months after receiving their discharge proving that bankruptcy will not destroy your credit for life. While restoring your credit takes time and effort, advice from your bankruptcy attorney will help you rebuild your credit in a timely manner.
Myth: I can only file bankruptcy once during my lifetime.
Fact: You can file for bankruptcy relief more than one time if you meet certain conditions however you must disclose this information to your bankruptcy attorney so they can determine the availability of bankruptcy in your circumstance. Even if you are not eligible for bankruptcy, consumer protection services are available to stop creditor harassment.
Myth: Everyone will know I filed for bankruptcy, especially my employer.
Fact: Although bankruptcy is a public legal proceeding, it is very unlikely that anyone will find out about your bankruptcy unless they run a credit check or you tell them. With the increased number of bankruptcy filings over the past few years, most publications do not list the filings and in most cases, employers will not find out about your bankruptcy. Either way, employers are not allowed to terminate your employment, refuse to hire you, or take other adverse action against you based on your bankruptcy.
Myth: Both spouses need to file bankruptcy together.
Fact: You do not have to file bankruptcy with your spouse however both spouses will need to complete the bankruptcy questionnaire in order to determine your household income. There may be ways to protect one spouses credit while saving your home with a single bankruptcy filing and your best interests will be discussed during your consultation.
Myth: Creditors can still contact me after filing for bankruptcy.
Fact: Creditors must stop all contact with you immediately upon filing bankruptcy. This means that even when the bankruptcy is in pending status, there can be no harassing phone calls, no collection letters, and no lawsuits. The automatic stay shields you from all collection activity and gives you the peace of mind that you are finally getting your debt put behind you.
Many good, honest, and hard-working people are falling on difficult times and thus they are considering bankruptcy as an option. Bankruptcy was created to help free you from the burden of debt when you cannot repay it and it allows you and your family a fresh start. If you are facing serious debt, hiring a good bankruptcy lawyer is the first step and Attorney Robert H. Pflueger understands the process thoroughly. He will help you comprehend the benefits and pitfalls as well as realizing the truth of bankruptcy although it is surrounded by a world of myths. Please call Orlando Bankruptcy Law today and let us help you explore all of your options.