Myths About Bankruptcy Debunked!!!
Sep 10, 2014
A common misconception is that only slackers, over spenders, and crooks file for bankruptcy. You couldn’t be more wrong! There were over 753,900 Chapter 7 Bankruptcies filed in 2013in the United States. The reasons people file for bankruptcy vary from case to case. Often we see loss of employment or medical issues being a large factor. Bankruptcy gets a bad rap; however, it was created to give a person a fresh start, no matter the reason, and is a legal right. We are here to set the record straight!
“Only the irresponsible file for Bankruptcy”
Wrong! We have been taught to budget our money so that we have more coming in then going out. This works great as long as nothing goes wrong. In life, no one anticipates losing a job, a car accident, injury or illness. Suddenly your income has been drastically reduced but your expenses stay the same. If you are in a thirty year mortgage, you cannot ask the mortgage company to cut your payments in half because life happened.
“Bankruptcy will ruin your credit”
Incorrect! When bills are going unpaid and the debts are mounting up, your credit is already taking a hit. The longer the bills go unpaid the more negative effect it has on your credit report. Filing bankruptcy may lower your score initially, but your debts will be gone. Eliminating the debts will give you a fresh start to begin rebuilding your credit once again versus fighting the uphill battle of trying to repay old debts plus incurring new debts.
“You will never get approved for a home loan”
Untrue! Filing bankruptcy will not prevent you from obtaining a home loan. In fact, within 2 years of filing for bankruptcy you could be eligible for a FHA home loan. Home loans are based on your credit score at the time you apply. Assuming you have worked on rebuilding your credit after filing for bankruptcy, you should not have a problem getting a loan. It is true that most mortgage programs have a waiting period after bankruptcy, but that period is usually only two to three years.
“You will lose all your property”
Absolutely not! When a person files bankruptcy they are allowed to exempt, meaning keep, a certain list of assets. There are items such as real estate, automobiles, retirement accounts and other items of value. Prior to filing for bankruptcy, your attorney will review your assets and confirm that you will not lose any property. For the average Joe, this is not a problem.
“You can no longer keep your home or car loan”
FALSE! When you file for bankruptcy and have a home or car loan, known as a secured debt, you have the option of keeping the property and the loan attached to it or walking away from both. The only requirements are that you are current on payments and have insurance on the property. If you are not current on payments but still want to keep the property, a Chapter 13 Bankruptcy may be best for you.
“Only the poor are eligible for bankruptcy”
MISTAKEN! In the state of Wisconsin a person qualifies for a Chapter 7 Bankruptcy while still making a good living. The income requirement to automatically qualify for Chapter 7 Bankruptcy depends on household size and income. The income limits update annually, as of April 2022, the amounts are shown below:
Household of 1 $57,934.00
Household of 2 $76,493.00
Household of 3 $92,586.00
Household of 4 $109,919.00
Household of 5 $119,819.00
Household of 6 $129,719.00
If your income is higher, you may still qualify if you have additional expenses, such as child support or significant continuing medical costs. If you still do not qualify, don’t get discouraged. You are still able to receive assistance through bankruptcy under a Chapter 13 Bankruptcy. In a Chapter 13 bankruptcy you can ask the court to reduce your debts and create a repayment program that is based upon your income.
“You can only file bankruptcy once in your life”
FALSE! In the state of Wisconsin you can receive a Chapter 7 discharge every 8 years or you are able to enter into a Chapter 13 Bankruptcy 4 years after receiving a Chapter 7 discharge.
“Taxes never go away in bankruptcy”
WRONG! Taxes can be discharge in bankruptcy if they fit into the requirements for dischargeability. The main requirement is that the tax debt be over three years past due. Another requirement is that the tax debt was not incurred due to fraud or false filing. If your tax debt meets these two requirements, you should speak with an attorney to confirm that you meet all the requirements.
“Judgments cannot be discharged in bankruptcy”
Incorrect! Bankruptcy eliminates all judgments that are not obtained due to fraud or other criminal acts. Just because a creditor turns credit card debts, pay day loans, or medical bills into a judgment doesn’t mean it will not go away in bankruptcy.
These are just some of the misconception about bankruptcy. The truth most bankruptcy fillers are just like you or me. Life can happen to anyone. If you are facing difficult times and are struggling financially, you need to contact Pedersen Law Office! We offer free consultations in all of our areas of practice and will meet with you personally to discuss your specific circumstances and see what options are available for you. Our law office serves the communities of Appleton, Neenah, Menasha, Oshkosh, Green Bay and their surrounding areas. Stop stressing and pick up the phone!