As an Asheville bankruptcy lawyer, I speak with people on a daily basis about the process. People frequently smile during our appointments and admit that they could of used the available bankruptcy relief sooner: last month, last year, or years ago! Here are a few myths which I commonly hear from clients which keep them from scheduling a bankruptcy consultation.
Myth #1: I’ll never be able to live with myself if I file for bankruptcy.
Almost everybody wants to pay their debts back, and feels at least a bit guilty about filing their case. Bankruptcy exists when clients need to make a choice about providing for their families or paying more interest on old debts. I always remind people that credit card companies charge huge interest rates because they know not all of the debts will be paid back. Its part of their business plan. And, nothing in the bankruptcy code prevents a client from paying back Bank of America or Wells Fargo. In my view, its smart to use a bankruptcy case to fund retirement accounts or college savings plans for minor children first. Most clients report that a bankruptcy discharge dramatically reduces financial stress from their day to day lives.
Myth #2: I’ll Never Get Credit Again
Most clients I represent get credit card offers as soon as their discharge is entered by the Court. Car loans are available immediately to most wage earners too. Most standard mortgage loans require a two year wait from the date your bankruptcy case was filed. However, most clients who will benefit from a bankruptcy case would not be able to qualify for a mortgage loan immediately anyway.
Myth #3: Bankruptcy will permanently ruin my credit score.
A bankruptcy case is often the first step to repairing a damaged credit score. If you start with a score below 600, I would expect your credit score to be higher one year after filing. If you start about 650, I would expect your credit score to be about the same one year after you file. If you start over 700, it will take a couple years to restore your good credit score. Creditkarma.com has a credit simulator which can estimate the effect of a bankruptcy case on your credit score long term.
Myth #4: I’ll lose my property in bankruptcy.
In over 95% of the bankruptcy cases I file, my clients keep all of their property. Part of my job is to explain if any property you own or have transferred is at risk in a Chapter 7 case. If so, we can almost always save that property by filing a Chapter 13 case. The bottom line is that we will know whether we can protect all of your assets before we file, and we will develop a strategy with asset protection in mind.
Myth #5: I’ll have to explain my financial choices to a Judge.
For the vast majority of clients, they will only need to appear one time at a ‘Meeting of Creditors,’ where no creditors appear, and a Judge is not present. The trustee may have a couple questions for you about the stuff you own, but the meetings typically take about 2-3 minutes. The most common question I get from clients after their 341 Meeting of Creditors would be, “Is that it?”
Most of the common fears people have about bankruptcy stem from misunderstanding. Banks spend millions in marketing each year to discourage folks from filing. Friends and neighbors hear only about nightmare cases (usually involving dishonesty), so those are the ones they talk about. Few people want to talk about a smooth, boring, and simple Chapter 7 case at a cocktail party.
If you are ready to learn about your rights, and live in Western North Carolina, I would be pleased to sit down with you in a free, initial bankruptcy consultation.
*The information contained on this website is not intended and does not constitute the providing of any legal advice or any legal opinions or services to any user thereof. The information available on or through this web page is not intended and shall not be used as a substitute for the advice and consultation provided by an attorney. Any factual examples used to illustrate concepts are hypothetical and do not depict actual events or real persons.