Most of what you hear about consumer bankruptcy consists of misinformation and scare tactics, if not outright lies. These myths are put forth by the banking, consumer finance and credit card industries — money-changers who do not want you to take advantage of the powerful federal laws that benefit individuals and families at their expense.
These industries spend millions to make people think they will lose everything or never be able to buy on credit again. We want to dispel some of these myths while providing you with the truth about bankruptcy, i.e., how it really works in practice and how it will work in your particular case.
The benefits of bankruptcy cannot be denied. It is a federally guaranteed measure to discharge debt and get a new lease on your financial life. Unfortunately, many of the myths that are perpetuated prevent people from getting the financial relief they need. Some of the most prevalent myths include:
This common myth is particularly damaging because, quite often, bankruptcy has the opposite effect. Yes, bankruptcy will appear on your credit record. However, your credit score can go up almost immediately after bankruptcy. When you file bankruptcy, you eliminate debt. Your debt-to-income ratio, which is a significant part of your overall credit score, improves overnight. Because bankruptcy helps your debt-to-credit ratio improve immediately, you may get credit offers soon after filing. If you make good credit choices in the future, you can quickly rebuild any damaged credit and further your standing. Additionally, most people who are considering bankruptcy do not have good credit to begin with. The damage has already been done. In those cases, filing bankruptcy almost always improves your credit score.
When you file bankruptcy, you may claim certain property as exempt. Property that may be claimed as exempt includes the equity in your home and automobiles. Exempt property also includes your furniture, clothing and other household goods. Qualified retirement funds may be claimed as exempt. While the myth is that you will lose everything, almost every one of our clients kept everything. The only assets that are not exempt are so-called “luxury items” or “toys,” such as ski boats or vacation homes. Most folks who file bankruptcy do not own nonexempt property. For those who do, most do not mind giving up the ATV in order to eliminate overwhelming debt. If you insist on retaining the bass boat and the lake cabin, that can be accomplished with a Chapter 13 plan.
Presumably, this myth originated in 2005, when laws were passed that changed the bankruptcy process. Bankruptcy filing is still a completely viable method for reaching financial stability.
While filings are a matter of public record, the likelihood of someone looking this up is remote. Unlike foreclosures and other legal proceedings, bankruptcy filings are not published in the newspaper. To the contrary, if you are deeply in debt and cannot pay, it is much more likely that your name will appear in the local newspaper’s foreclosure or legal notices section if you don’t file bankruptcy. Furthermore, filing bankruptcy does not have nearly the stigma that many people think. A quick Google search shows the prevalence of bankruptcy filing. Many famous people have declared bankruptcy. Approximately 1.5 million consumer bankruptcy cases are filed each year.
Regardless of your circumstances, if you are working through unmanageable debt, we recommend you get in touch with us so you can make a well-informed decision about how to resolve your debt problems. Don’t fail to exercise your legal rights based on lies, misinformation and myths. Your first appointment with an attorney is free. You will learn the truth about bankruptcy and how it works in your particular financial situation. To schedule a free initial consultation to discuss bankruptcy, call 601-948-4878 or email the firm.
Jackson-based Pond Law Firm is a federally designated debt relief agency. Our lawyer helps people file for bankruptcy relief under the Bankruptcy Code.