Bankruptcy myths are common. Below are a few of the common bankruptcy myths our clients ask us about:
Myth #1: Filing for bankruptcy means that you must give up your possessions.
TRUTH: Only in specific and rare situations do people lose their stuff in bankruptcy – and you will know this information before you file the bankruptcy.
There are lots of horror stories on the Internet about people who filed for bankruptcy and lost their possessions, but the truth is less exciting. Most people who file for bankruptcy do not have to give up their possessions unless they want to. You usually keep your home, car, retirement, and personal items. These can typically be exempted from bankruptcy under the law up to a certain amount of value. While every case is different, my clients’ are usually surprised about the broad scope of things that I can often protect. An example is future tax refunds. There is a lot of discussion online about giving up tax returns in Oregon to eliminate debt. This almost never occurs since a change in Oregon bankruptcy law in July of 2013 allowed Oregonians to us the federal bankruptcy exemptions.
Myth #2: You only get once chance to file bankruptcy. If you forget to include a debt, you lose your chance to eliminate that debt.
TRUTH: In most circumstances, missing or unknown claims can be added as part of the bankruptcy case if they are not provided for initially in your case.
If you are considering bankruptcy, chances are that you ignored collection letters, bills, and creditor’s calls for quite some time. You might not know exactly how much you owe or to whom, and you might be putting off bankruptcy because you are worried about forgetting something important.
Many people do this—they worry that they only get one chance to file bankruptcy and that, if they forget to include a debt, they lose their chance to add it. However, this is not true. If you forget to add a debt to your bankruptcy petition, your lawyer can usually amend the petition at a later date. The law lets people, with the help of their lawyers, amend the documents they file, so any bills that may be forgotten can be added.
There is also a special provision in Chapter 7 bankruptcy cases called a Beezley claim. This happens when a creditor is not notified of a debt in your bankruptcy case. If the case falls under the Beezley claim provisions, even if you do not list the debt, it is eliminated in your bankruptcy under the right circumstances. Be sure to ask me about this when we meet.
Myth #3: Bankruptcy irreparably destroys your credit.
TRUTH: Your credit can and generally will improve. Bankruptcy is a bump in the road; not the end of the road.
After bankruptcy, there are many tips and tricks to dramatically improve your credit over a short period of time. It is not uncommon for a client I help a year or two a go to visit me and tell me about their great credit score or in some cases their recent purchase of a house. While the bankruptcy itself is a substantial credit event, after the bankruptcy is resolved you can rebuild your credit score much faster than is intuitive if that is important to you.
For instance, as part of EVERY bankruptcy case I file in my office, the three main credit reporting agencies Experian, Equifax, and Transunion gets notice of your discharge of debt. This way they have the ability to act quickly after your case to update your credit reports. Further, we notify Checksystems and Telechex about your bankruptcy. This eliminates delay in the ability to open new bank accounts after bankruptcy if your bank rating is affected by past debts.
To get answers to bankruptcy myths or other questions regarding debt relief, contact us today!