Learn the truth. The following are some of the most common misconceptions about bankruptcy and the real truth:
- Will everyone know I’ve filed for bankruptcy? Not necessarily true. When your bankruptcy is filed the court system will index your filing by your Social Security number. The filing is published in a local legal paper. Most likely the only people who will know of the filing will be your creditors.
- All my debts will be wiped out in Chapter 7 bankruptcy. Although the vast majority of your debt will be wiped out, other debt is not discharged. For example, any debt incurred by fraud, child support, alimony, some tax debt and student loans.
- I’ll have to give everything I have to the bankruptcy court. Not true. The purpose of a bankruptcy is to help you obtain a “Fresh Start.” The court allows certain assets to be protected from the bankruptcy court and your creditors. In Illinois, this includes some home equity, vehicle equity and personal property. Your retirement accounts are fully protected and no one can take them from you.
- I’ll never get a credit card again. Not true. You will most likely received offers for credit card after you receive your discharge. Also, you will be able to purchase a new home within a year or two from the discharge.
- Bankruptcy will permanently ruin my credit. Our clients are often surprised on how soon they are able to rebuild their credit. If you’re careful your credit score will climb quickly after you file your bankruptcy. Shortly after your discharge you will be able to purchase a new car and a home purchase can be done with 18 months of discharge.
- Both I and my spouse have to file for bankruptcy. The only person who needs to file will be the party who owes the debt. Although, it has been our experience that the debt is usually incurred by both the husband and wife which is why we usually file our cases as joint.
- Only irresponsible people file for bankruptcy. Almost all of our clients file for a bankruptcy due to circumstances beyond their control. For example, a job loss, prolonged illness or divorce. Our office is usually the last resort for people to be able to resume a normal life without the constant struggle money struggles.
- Do I have to include all my creditors? There is no picking and choosing in a bankruptcy filing. You will be discharged of all debts that are dischargeable. If you have certain creditors that you wish to repay you can voluntary pay them but you are not under any legal obligation to do so.
- IRS debt is not wiped out through bankruptcy. This is not true but as with all things related to the IRS it is difficult and very complex. A bankruptcy filing can provide relief from the IRS and the IRS must abide by the bankruptcy court. This is one area where an experienced attorney can assist you to determine the dischargeability of any back taxes.
- I can only file bankruptcy once. In a Chapter 7 Bankruptcy Code only allows an individual to receive a discharge once every eight years. In a Chapter 13, you can file for relief from your creditors but the time period between filings will determine if you will receive a discharge.
- I can run up the balance on all my credit cards. No. The bankruptcy rule states that any use of credit within 90 days of filing is suspect. Most likely, any charges within the 90 days will be discharged.
- Bankruptcy filing is a difficult thing to do. The filing of a bankruptcy should not be undertaken without the help of an experienced bankruptcy attorney. The process is difficult and has many pitfalls. One mistake and your dent could be determined to be non-dischargeable. I do not recommend filing a bankruptcy by yourself.
Learn more about bankruptcy and how bankruptcy can help you break free from debt and start fresh. The attorneys at Lynch Law Offices, P.C., are committed to helping individuals develop a debt relief solution that meets their individual needs. From our office in Lisle, we serve clients throughout DuPage County, including Naperville and Wheaton. Contact our firm today.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.