Bankruptcy Myths

Many people hesitate to file bankruptcy because they are afraid of the consequences, they are ashamed, or they don’t understand bankruptcy process.  In this post, you will find some bankruptcy basics and get rid of some common misconceptions about bankruptcy.

Didn’t the 2005 bankruptcy law make it almost impossible to file bankruptcy? No.  The 2005 bankruptcy law made a lot of changes to the Bankruptcy Code, but it hasn’t stopped people from filing bankruptcy.  When the law changed, people though that it would stop people from being able to file bankruptcy.  That was not true.  You can still file bankruptcy. The biggest effect is that there are more steps for bankruptcy lawyers, but with a few exceptions, the client will never know that the law was changed.   The biggest change for you is that you have to complete two debtor education courses.  These courses can be done over the phone or on the internet.  Each course takes a little over an hour.  The 2005 law added some eligibility requirements for chapter 7, but most people meet the requirements and can still file a chapter 7.   More about chapter 7 bankruptcy in Seattle.

Isn’t it shameful to file bankruptcy? No.  There were over 1 million bankruptcy filings this year alone.  The United States Constitution provides for bankruptcy protection.  Many of our founding fathers went broke at some time in their lives. Most people file bankruptcy because the cost of living is increasing faster than the average salary.  In other words, most people in bankruptcy had very little, if any, control over the factors that caused their bankruptcy.  You should not be ashamed.

Won’t I lose all of my property in bankruptcy? No.  The bankruptcy code is meant to give you a fresh start, it is not meant to punish you or take your property.  There are protections in the bankruptcy code so that the vast majority of cases don’t include the turnover of any property to the bankruptcy trustee.  If there is a risk that the bankruptcy trustee could take your property, then I will structure your case to protect your property.  In most cases, none of the debtor’s property is even at risk of turnover.  More about chapter 7 bankruptcy in Seattle.

What happens to my house or my car in bankruptcy? If you can make the payments, then you can keep your house or your car.  If you fell behind on your payments, you can still keep your property.  If the missed payments are too big, and you can usually work something out with a creditor in a chapter 7.  If you miss a lot of payments, or if the amount is very large, then you file a Chapter 13 and make up the payments throughout.  If you want to get rid of a house or a car, then you can; and, the debt will just be wiped out with the rest of your debts.

Can the court take my paycheck in a chapter 13? No.  The court cannot take your paycheck and a chapter 13.  In fact, it costs less to complete a chapter 13 than it does to pay off your debts outside of bankruptcy.  The chapter 13 plan payment is based on whatever is left after all of your taxes, mortgage or rent payments, car payments, and living expenses are deducted from your paycheck.  In other words, you pay all of your living expenses and then whatever is left over goes the chapter 13 plan payment.  More about chapter 13 in Seattle.

Do I have to appear from the bankruptcy judge? No.  You do not have to appear before the bankruptcy judge.  All you have to do is attend a 341 meeting of creditors.  The meeting is held in front of the trustee.  This meeting usually takes 5 to 10 minutes and I will be there with you.

When should I file bankruptcy? I know that filing bankruptcy is a tough decision, but don’t wait until it’s too late.  Debt does not go away on its own.  Debt only gets worse with time. First, the longer you are in debt the more stress you will experience.  The longer you are in debt, the longer you have to deal with calls from creditors, the risk of garnishment, the risk of repossession or foreclosure, and the worse your financial situation will become.

Second, if you are worried about foreclosure or repossession or if a creditor has sued you, then don’t wait to contact a bankruptcy lawyer.  It’s important for your lawyer to start on your case as soon as possible.  You are probably feeling a lot of stress and are worried about your situation delay will only make things worse.  You’d be surprised how much better you feel once you have a bankruptcy lawyer working on your case for you.

Contact the Law Office of David H. Fuller, a Seattle bankruptcy attorney, for your free consultation.

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