Category Archives: Bankrutpcy Myths

Michigan Bankruptcy Myths

Posted on by
Reply

Here are 10 myths about the Chapter 7 bankruptcy, Chapter 11 bankruptcy, and Chapter 13 Michigan bankruptcy laws:

1. You Cannot File Bankruptcy Under The New Law

Many people believe that the new bankruptcy law passed in 2005 essentially made bankruptcy unavailable to most people. While eligibility for a Chapter 7 bankruptcy may depend on your income, bankruptcy is still available. In many cases, all of the benefits under the old Michigan law remain under the new law.

2. You Will Lose Your House

While you cannot wipe out a mortgage in bankruptcy, if you are able to maintain your payments on your house you can keep it. If you file a Chapter 13 monthly payment bankruptcy, you can use your bankruptcy plan to catch up past due payments over a much longer period than the bank is like.

3. You Will Lose All Your Possessions

People are often afraid that if they file bankruptcy they will lose everything they have. The new Michigan bankruptcy laws generally allow you to keep personal items such as the equity in your home, appliances, furniture, vehicles and similar household property. In most cases, you can also keep your retirement accounts.

4. Your Bankruptcy Will Be Public Knowledge

While anyone in theory can go to the Bankruptcy Court and review case files, this is very uncommon. Most people that file bankruptcy do so without their friends or family knowing anything about it.

5. You Will Never Be Able To Get Credit Again

While bankruptcy has a negative effect on your credit rating, it also reduces your overall debt. Many individuals are able to rebuild their credit over a matter of a few years after filing bankruptcy, and find that bankruptcy itself does not prevent them from obtaining loans for a vehicle or a home.

6. Bankruptcy Cannot Wipe Out Court Judgments

Many people believe that once a there is a court judgment there is nothing they can do. In fact, bankruptcy prevents a court judgment from being collected. However, certain judgments, such as divorce judgments, generally are still collectible.

7. Creditors Will Continue To Call You

Once you file bankruptcy, the law prevents a creditor from contacting you directly or by phone or mail in an attempt to collect a debt.

8. You Can Pick Or Choose Which Debts To Include In A Bankruptcy

When you file Bankruptcy, you need to notify all of your creditors. Some people prefer to leave certain debts off their bankruptcy and “not include” them in the bankruptcy. While on some cases you can agree to pay a debt despite the bankruptcy, you must list all of your debts and creditors in the bankruptcy papers.

9. You Still Owe All The Unpaid Back Taxes

While taxes are sometimes non-dischargeable, you can often discharge personal income taxes as long as they are at least 3 years old and you have filed returns.

10. Filing Bankruptcy Is Difficult

While it is important to carefully review all of the information included in a bankruptcy filing, we strive to make the process very smooth and relatively painless.

Call Firebaugh & Andrews today for your free evaluation. 734-722-2999

5 Bankruptcy Myths Debunked

Posted on by
Reply

While some assume that a bankruptcy filing means the person can’t resist the temptation of credit cards (and in some cases, it may), most people who will file for bankruptcy do so for other reasons. Here’s a look at some of the myths surrounding consumer bankruptcy.

1. People who file for bankruptcy are financially irresponsible. “There’s always going to be some kind of abuse, but it’s far more likely that people run into very serious personal problems in one of three areas: losing their job, going through a divorce, or suffering a serious illness,” says Walter W. Miller Jr., who teaches bankruptcy law at Boston University School of Law.

Long-term unemployment, the legal fees associated with divorce, the cost of running two households following a divorce, or the high cost of medical care have all driven well-intention Americans into bankruptcy. As of April 2012, more than 5.2 million Americans had been unemployed for six months or longer, according to the Bureau of Labor Statistics. Meanwhile, a 2011 survey by the Centers for Disease Control and Prevention found that 20 percent of American families had problems paying medical bills in the past year.

2. Bankruptcy discharges all past debts. Many people file bankruptcy hoping they’ll be able to start fresh afterwards, but several types of debt are not discharged by bankruptcy. “If you have domestic support obligations [such as alimony or child support], those can’t be removed under any circumstances, “If you have to pay restitution because of a crime, that’s another debt that can’t be removed.”

As a result of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, student loan debts also fall in that category, although a Congressional bill called the Fairness for Struggling Students Act would allow private student loans to be discharged in bankruptcy court. According to Epstein, student loans can be forgiven if you’re able to prove a hardship such as permanent disability, but that process is separate from bankruptcy.

Tax debts are sometimes reduced or discharged depending on the circumstances, but as Epstein says, “if you didn’t file tax returns, there’s no way you’re going to get those tax debts removed.”
Continue reading →

Bankruptcy Myths Debunked: Fact vs. Fiction

Posted on by
Reply

When you think of bankruptcy, what words pop into your head? Failure? Broke? Bottom? The end? Humiliation?

Maybe once upon a time, but not so much anymore. While bankruptcy should never be a first choice, in some cases, it may be the only choice. Before you decide whether or not bankruptcy is right for you, we’re debunking the top five bankruptcy myths to bring you the facts.

1. Myth: All bankruptcy options are essentially the same

Fact: Not true. The three you may have heard of — Chapter 7, Chapter 11 and Chapter 13 – are very different. Many individuals file under Chapter 7, which usually allows them to erase most of their debt in a matter of months. Chapter 7 has a higher success rate and is cheaper to file than Chapter 13, which tends to take a lot longer because it requires individuals to use their disposable income to repay a percentage of their debt over a five year period. Whether you qualify for a Chapter 7 or Chapter 13 is dependent on your state’s median income. Then there’s the Chapter 11 bankruptcy, which involves the financial reorganization of a business and can take many years. To know which option is right for you, consult with a bankruptcy attorney. Most consultations are free and can give you a much clearer picture of which option is most realistic for your situation.

2. Myth: If you file, you’ll lose everything you own

Fact: This may be the most common myth, and, unfortunately, it keeps people from filing when it may be the best option for some. Bankruptcy laws vary from state to state, but all states protect certain assets, such as your house, car, retirement plan, household goods and clothing. Bankruptcy should never be the first option for dealing with overwhelming debt, but it may be the best option depending on the individual circumstances. Before deciding on bankruptcy, research and consider all of your options — from hardcore DIY budgeting,  consumer credit counseling, or negotiating a settlement — bankruptcy should be your last option, but it doesn’t mean that it can’t be the right option depending on your financial situation.

3. Myth: You’ll never be able to qualify for a loan again

Fact: Nope. It’s true that filing for bankruptcy will stay on your credit report card for 10 years, but it doesn’t mean you won’t ever be able to borrow or qualify for a loan again. The best way to recover from bankruptcy is jump back into the game and work at gradually rebuilding your credit — start with a secured card and manage it wisely.  You’ll get credit card offers in the mail long before that 10 year mark. They will be from lenders offering cards with very high interest rates. Resist the temptation. Another tip, if you have a credit card with no balance when you file for bankruptcy, you don’t have to list it as a creditor since you owe it no money, and you might be able to keep that card after you file. Because it will cost you a lot more to borrow money after you file, if you’re planning to buy a house or a car anyway, you might want to consider your options before you file. Having said that, don’t max out all your credit cards and then file for bankruptcy. Bankruptcy judges and the trustee assigned to your case will review your purchases before you file and they very well may conclude that your attempt to file for bankruptcy constitutes fraud.

4. If you file for Chapter 7 bankruptcy, all debts are wiped clean

Fact: Dream on! Certain types of debts cannot be erased, including child support, alimony, government-issued student loans, legal settlements you’ve been ordered to pay and debts incurred as the result of fraud. This is a major issue for consumers defaulting on student loan debt and definitely an important fact to consider before opting to file.

5. Myth: If you’re married, both of you must file

Fact: This is true a lot of the time but not always. If the debt is in one spouse’s name, there is no need for both to file. In fact, in that case, they shouldn’t both file. Before you decide, consult with a bankruptcy attorney for the best advice –initial consultations are usually free and worth the time. More often than not, debt is in both their names, so both must file.

Bonus Myth: Only “losers” file for bankruptcy

Fact: Most people who file didn’t do anything risky or reckless that led to their financial mess. They file because fate has dealt them a blow – divorce, loss of a job, identity theft or a serious illness – that wreaked havoc other finances. Most file after months — or even years — of struggling to pay their bills and falling more and more behind. Bankruptcy is not always the answer, but for some it may be the only answer.

Call Firebaugh & Andrews today for your free consultation  734-818-0948