The Top 10 Misconceptions About Bankruptcy

Misconception #1: I will lose all equity in my home and vehicle when I file bankruptcy.

In Illinois, you are allowed to retain up to $15,000 of equity in your house ($30,000 per household if both husband and wife are on the title.) However an important point to remember is that proceeds from the sale of a house are exempt for 1 year from the time of sale.
For vehicles, you are allowed up to $2400 of equity in one car for a single person and $4800 total for spouses filing bankruptcy jointly, as long as both spouses are on the title of the car.

Misconception #2: Someone from the court will come to my house and go through my belongings.

Generally no one will come out to your house. All that is necessary is to list your possessions on your bankruptcy schedules under oath.

Misconception #3: I will never be able to finance a vehicle again.

My clients often find it easier to get financed for a car after they receive a Chapter 7 discharge. This is due to their debt to income ratio being improved and the car lender knowing the individual cannot file bankruptcy again for at least 8 years.

Misconception #4: After filing bankruptcy, I will be unable to get another credit card.

Many clients inform me they have numerous credit card offers once receiving their Chapter 7 discharge. The importance of this is many people need credit cards for work or to book reservations.

Misconception #5: Filing a bankruptcy is simple. All that is necessary is to file a couple of papers in court.

Bankruptcy laws are a complex maze of rules and regulations. The creditors have aggressive legal counsel to fight you. For the best outcome you need the best possible legal counsel to guide you through the process.

Misconception #6: All my debts get erased.

This is not always the case. Child support does not get wiped out, along with some types of tax, and certain other types of debt. Also you must keep paying on secured debt that you want to keep such as a home or vehicle.

Misconception #7: To file bankruptcy, I must owe a lot on money.

Often times people who file for bankruptcy are current on all their debts. However, they see upcoming problems. They may be transferring debts from one credit card to another and want to end the vicious cycle of debt. Other times a change in income will cause upcoming debt they wish to eliminate.

Misconception #8: I will have to go to court where my creditors and a judge will harass and embarrass me.

You will attend what is called a meeting of creditors. However creditors rarely actually show up and I will be attending the meeting with you. The court appointed trustee typically has only simple, straightforward questions for you.

Misconception #9: After I file bankruptcy I will have to give up my dreams and chances of becoming a success.

What do Walt Disney, Henry Ford, Anna Nicole Smith, Larry King, Mike Tyson, and Rush Limbaugh all have in common? You guessed it. They all have filed for bankruptcy in the past. There is nothing wrong in realizing you are in too much debt and are going to do something about it. Great achievements can still be in your future without the burden of too much debt on your shoulders.

Misconception: #10: Bankruptcy will cause me to lose my job.

This is not the case. Under the bankruptcy code you are protected. An employer cannot discriminate because of a bankruptcy filing.