Some Myths About Bankruptcy
and the Truths Behind Them
If you are overloaded with debt, filing for bankruptcy may be the best possible solution. Every year, bankruptcy offers thousands of people the opportunity to start over with their financial lives and leave the sleepless nights of worry behind them.
Before deciding to file for bankruptcy, however, it is critically important to make sure you understand all the facts, advantages and disadvantages of the bankruptcy system.
After more than 30 years of guiding Memphis-area residents through the bankruptcy process, the Law Office of Charles Rich has counseled people on almost every type of worry or concern that they bring to our offices.
Here we present some of the most common worries about bankruptcy, many of which are based on misunderstandings about how bankruptcy works.
Bankruptcy Myth #1:
The Bankruptcy Reform Laws of 2005 Will Prevent Me From Filing
In 2005, Congress enacted major reforms to our bankruptcy laws. Contrary to public opinion, however, these reforms do not make it impossible to file for bankruptcy and wipe out some — if not all — of your consumer debt.
It is true that the new bankruptcy laws require bankruptcy petitioners to go through more steps before they can file, including credit counseling. It is also true that the new bankruptcy laws may prevent some people from filing if they have low debt ratios (a debt ratio is the amount of your debt relative to the amount of your income).
However, some form of bankruptcy is still available to most people. Even if you do not qualify for Chapter 7 bankruptcy (which wipes out your unsecured debt), you may still qualify for Chapter 13 bankruptcy (which creates a court-ordered and more manageable debt repayment plan).
Bankruptcy Myth #2:
I'll Lose All My Possessions if I File Bankruptcy
You do not have to sell or give up all your possessions before you file for bankruptcy.
Chapter 7 bankruptcy ("straight" bankruptcy) includes exemptions that allow you to keep your personal property and the home you live in, within certain limits. For example, you must be paid up on any home or auto loans in order to keep possession.
Under Chapter 13 bankruptcy, you also may keep your home and other property.
Bankruptcy Myth #3:
I'll Never Be Able to Buy Another House
Many people believe that they will never be able to buy another home if they file for bankruptcy. Or, they may believe that they have to wait 10 years before they will qualify for a home loan.
This is a myth. After bankruptcy, you will qualify for credit again — and in a shorter time period than 10 years. Creditors may require you to accept a higher interest rate because of your credit history, however.
Bankruptcy Myth #4:
I'll Be Fired if I File for Bankruptcy
Many of our clients worry whether bankruptcy filings are private or public, and about the effect of bankruptcy on their current job or their ability to get a job.
It is illegal for any employer to fire you because you file for bankruptcy. If you are fired from your job because you filed for bankruptcy, you should contact an attorney immediately.
More Information About Bankruptcy
The Law Office of Charles Rich is happy to provide additional general information about the bankruptcy process on the following pages of our Web site:
- Bankruptcy Information Center
- Bankruptcy Overview
- Chapter 7 Bankruptcy
- Chapter 13 Bankruptcy
- What To Do Before Filing Bankruptcy
- Stopping Home Mortgage Foreclosures
- Life After Bankruptcy
Get Bankruptcy Advice From a Lawyer With More Than 30 Years' Experience
Our law office is led by attorney Charles Rich, who has practiced bankruptcy law in the Memphis area for more than 30 years. Mr. Rich has guided thousands of clients through the bankruptcy process. He personally handles every stage of each client's case with the efficiency that comes from decades of experience.
For a free and confidential consultation with an experienced bankruptcy lawyer, contact our office. We will answer your questions and discuss your options in a comfortable and respectful setting.
To schedule an appointment, call 901-323-0890 or send us an e-mail.
Complete our bankruptcy case evaluation form.