TENNESSEE BANKRUPTCY MYTHS

MYTH #1: CONGRESS HAS ELIMINATED BANKRUPTCY FOR THE “LITTLE GUY.”

Fact :Despite what you may have heard in the press, bankruptcy is still alive and well and available to the little guy—and girl. Yes, in October 2005, new bankruptcy reform laws went into effect that may make it more difficult for some individuals to qualify for Chapter 7 relief. However, consumers in serious financial trouble should still be able to qualify for protection under the Bankruptcy Code. The sky has not fallen on bankruptcy!

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MYTH #2: A DEBT COUNSELING SERVICE CAN HELP ME ELIMINATE MY DEBTS WITHOUT THE STIGMA OF BANKRUPTCY ON MY RECORD.

Fact : This myth is a very dangerous one. Debt counselors cannot get rid of your debts, nor can they stop your creditors from harassing you. All debt counselors do is help you negotiate new terms on your existing debt with your creditors-your creditors do not have to agree to any restructuring, and they can still come after you for any unpaid balances. By contrast, the moment you file your bankruptcy case, many of your creditors are prohibited by law from taking any legal actions against you, and once your bankruptcy is complete, many of your debts are gone forever. Furthermore, credit counselors do not necessarily have your best interests in mind-they are often owned by the very creditors that are making your life miserable to begin with. Don’t let their non-profit claims fool you-when you use a debt counselor, someone is making a lot of profit off you, and in most cases you’ll still be hopelessly in debt.

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MYTH #3:Filing for Bankruptcy Means I Will Lose My House and My Car.

Fact :This frightening idea is among the most common misconceptions surrounding bankruptcy. The only type of bankruptcy where you might lose your assets is Chapter 7. During that particular process, a trustee will take stewardship of your possessions and property to repay creditors and debt collectors.

However, it is important to note that more than 96 percent of Chapter 7 filings end with no assets sold. That means the debtor gets to hold on to all of their belongings; some assets can be protected with exemptions,and in many situations, creditors do not feel like it is worth the time and effort to liquidate the remaining assets for money.

While Chapter 7 leaves the door open to asset sales, other types—such as Chapter 13—slam it shut. In Chapter 13, a debtor will be able to retain all of their possessions from start to finish. Instead, a trustee will factor take the value of the items into account when formulating the repayment plan.

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MYTH #4:Bankruptcy Will Prevent Me from Ever Owning a House or Car Again.

Fact :Despite its bad reputation, bankruptcy is not a death sentence for your financial future. It is only a temporary step back so that you can take more significant leaps forward later. So, yes—you will be able to purchase a car and home again when you are back on solid ground.

When you file for bankruptcy, you may be mandated to wait two years before you can apply for a conventional mortgage. Consider this period as an opportunity to save for a down payment and improve your credit score. That way, when it comes time to buy a new home or car, your financial affairs will be in a significantly stronger position.

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MYTH #5: BANKRUPTCY WILL RUIN MY CREDIT RECORD.

Fact : This is absolutely false. What ruins your credit record is your inability to pay your debts on time. After your bankruptcy case, many of your debts will be discharged, and you will be given a fresh start. If you can keep on top of any new debts you incur after you emerge from bankruptcy, your credit record should actually improve.

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MYTH #6: I WON’T EVER BE ABLE TO GET CREDIT AFTER MY BANKRUPTCY.

Fact :False. Think about it; if you owned a credit card company, who would you rather give a credit card to: someone who has a massive debt load and is behind on all their bills, or someone whose bills have been wiped out? Probably the latter, right? That’s why you should be able to get credit after bankruptcy. Since many of your debts will be wiped out after bankruptcy, and, in the case of a Chapter 7, you won’t be able to file another one for another eight years, many creditors will see you as a good credit risk after your bankruptcy.

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MYTH #7:MY SPOUSE IS AUTOMATICALLY LIABLE FOR MY DEBT.

Fact :Depending on your individual situation, your spouse is not always held liable for your debt. During your first meeting with me, we can discuss this specific matter further and determine how filing bankruptcy affects both you and your spouse.

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MYTH #8: MY NAME IS GOING TO BE IN THE NEWSPAPER.

Fact :Not true. Your name will not be in the newspaper. There is no public, publishing requirement for bankruptcy. At Knoxville Bankruptcy Attorney Offices, we handle all bankruptcies with a very high level of confidentiality. No one has to know that you have chosen to seek relief from your debts through bankruptcy. Many of your friends, neighbors, and coworkers may also have filed bankruptcy without you even knowing.

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MYTH #9:ONLY LOSERS FILE BANKRUPTCY.

Fact : Incorrect. People file bankruptcy every day, even notable people who go on to much success afterwards. Larry King, Walt Disney and even Donald Trump have all filed for bankruptcy during their lives. Read our famous fresh starts page to learn more about people just like you, who have used bankruptcy to get back on their feet!

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MYTH #10:Going Bankrupt Makes Me a Bad Person.

Fact :It is easy to see why filing for bankruptcy might seem like a personal failure. The truth is that it is a financial remedy that offers people a fresh start at a prosperous future. This reasoning is precisely bankruptcy is explicitly mentioned in the US Constitution

Many times, bankruptcy is wholly out of our control. A majority of cases occur because people cannot pay their medical expenses,due in part toskyrocketingdeductibles and stagnant wages. But no matter why you decide to file for bankruptcy, know it is designed as a form of debt relief, and not a sign of personal shortcoming or failure.

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MYTH #11:Filing for Bankruptcy Is a Permanent Black Mark on My Credit Record.

Bankruptcy is certainly not going to bolster your credit record, but it is far from catastrophic—and it isn’t permanent. Yes—you can expect your credit record to drop, and, yes,lenders will inevitably offer you higher interest rates, especially following the bankruptcy. Immediately after filing, your credit score is likely to creep up for a while. But the impact of the filing will only last seven to ten years, depending on the lender. Plus, the consequences of the bankruptcy, such as the lower credit score and higher interest rates, will disappear over time, especially if you can make consistent payments.

And stay focused on the bright side of it all: You will no longer be in debt.

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MYTH #12:Everyone Will Know I Filed for Bankruptcy.

Fact : Yes, it’s true: Bankruptcies are a matter of public record, but the odds of that information reaching the general population are slim to none. That is because there is a public access system known as PACER, which contains all the information regarding bankruptcies in the United States. You can only access this information if you register for PACER—and pay per page to obtain the pertinent documents.

This hurdle means your friends, neighbors, and co-workers are unlikely to know about your filing. Similarly, yes—a bankruptcy will stay on your credit record for seven to ten years. But after that, there will no longer be evidence it ever occurred.

Bankruptcy is a personal matter and is only made as public as you want it to be. The only other way the general public may find out is during the listing of debts in Chapter 7 and Chapter 13. If you owe money to an individual, they will be alerted to the bankruptcy so that they can get their compensation.

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MYTH #13:Bankruptcy Is a Temporary Fix, and I’ll Have to Pay Back My Debt Eventually.

Fact : Discharged debts are settled debts. That means you will no longer have any financial obligations to creditors or debt collectors. How quickly debt is discharged through bankruptcy depends on the type you select.

For instance, Chapter 7 has immediate results when it comes to resolving debt obligations. Chapter 13 focuses on consolidating your debt and repayment, which can take three to five years to discharge. Either way, a debt-free future is possible.

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MYTH #14:Bankruptcy Will Erase All My Debts.

Fact : Bankruptcy is not a magic wand that gets rid of all debts. Some types of debt are considered non-dischargeable, which means you will have to develop a payment plan or negotiation with creditors to resolve the debt obligations.

Here is a list of some types of debts that bankruptcy cannot eliminate:

• Student loans
• Child support
• Alimony
• Home mortgage
• Recent credit card debt
• The debt of a spouse or another person
• Debts related to fraud, theft, or embezzlement
• A car loan (if you want to maintain possession of the vehicle)

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MYTH #15:Filing for Bankruptcy Isn’t Worth the Effort.

Fact : Bankruptcy is not the most pleasant process, but it can relieve you of many burdensome financial pressures. Taking the time and effort now can pay dividends in the future. Bankruptcy gives you a chance for a fresh financial start, rather than perpetually trying to chip away at medical or credit card bills that never seem to get any lower.

While bankruptcy can have short-term negative consequences for your interest rates and credit record, the goal is to put yourself in the best situation possible for the long run. Bankruptcy gives you time to regroup.At the same time, it puts an end to debt that is spiraling out of control, as well as any harassment from repo men, creditors, or debt collectors.

Furthermore, bankruptcy often allows you to maintain a similar standard of living. Thanks to exemptions in Chapter 7 and the built-in security of Chapter 13, you can hold on to your possessions. Plus, no matter what type of bankruptcy you file, an experienced attorney will be at your side to provide you the legal counsel you need to move forward with assurance. Call Joe, Knoxville Bankruptcy Attorney today at in Knoxville, TN, to find out how we can help you today.

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