Bankruptcy Myths – What Credit Card Companies Don’t Want You to Know

Bankruptcy MYTH 1: I’ll never be able to buy a home if I file bankruptcy.
Wrong. You probably can’t buy a home now, but bankruptcy will help you with several things moving forward. Bankruptcy will give you the ability to save for a down payment. Also, you will have the income to qualify for a mortgage, something you probably can’t do now because your debts take up all of your disposable income. Most people in Arizona can qualify for a mortgage within 2 years after their bankruptcy. To qualify for a mortgage, your debt cannot exceed a certain percentage of income per month. If your debt is too high, you will not qualify, EVEN IF YOU HAVE PERFECT PAYMENT HISTORY! That is why “robbing Peter to pay Paul” will never solve your problems. Many people continue to borrow on one card to make payments on another thinking that on-time payments are all that matters. That is totally wrong. You can consult any mortgage lender to verify this.

Bankruptcy MYTH 2: I can have my bankruptcy filed by a Document Preparer.
In Arizona, Document Preparers charge you a fee to prepare and file your bankruptcy. However, Document Preparers cannot legally give you advice because they are not attorneys. If they are, they are breaking the law. They simply file whatever bankruptcy papers you ask them to file, whether you should do that or not. Our law firm recently represented a client who had a Petition Preparer file a Chapter 7 for her even though she had $200,000 worth of equity in her house. Her assets exceeded her debts and she would have lost her house to her creditors. We are converting the woman’s bankruptcy to a Chapter 13 to help her keep her house. We have seen several cases in 341 bankruptcy hearings where Bankruptcy Debtors have had their bankruptcy petition prepared by a document preparer, and didn’t know they were un-exempt, or over an exemption on certain property. The result can be devastating. Remember, anyone can file bankruptcy forms, but without an experienced attorney advising you, you could end up losing thousands of dollars of assets to creditors.

Bankruptcy MYTH 3: Everyone will know I’ve filed for bankruptcy.
Unless you’re a prominent person or a major corporation and the filing is picked up by the media, the chances are very good that the only people who will know about a filing are your creditors. While it’s true that bankruptcy is a public legal proceeding, the numbers of people filing are so massive, especially Phoenix-Mesa, Arizona bankruptcy filings, very few publications have the space, the manpower or the inclination to run all of them.

Bankruptcy MYTH 4: I’ll lose everything I have.
This is a common misconception that keeps people who really should file for bankruptcy from doing it. While the bankruptcy laws vary from state to state, every state has exemptions that protect certain kinds of assets, such as your house, your car money in qualified retirement plans, household goods and clothing. In fact, most people, will pass through a bankruptcy case and keep everything they have. If you have a mortgage or a car loan, for example, you can keep those as long as you keep making the payments.

Bankruptcy MYTH 5: I don’t have to list all of my creditors.
This is not true. In Phoenix, Arizona, and perhaps all districts, you do have to list all of the debts that you owe and the property that you own in your bankruptcy petition. You cannot discriminate between creditors, even if you want to keep paying them. It’s great that you to want to continue paying creditors, but it is still mandatory to include the debt. If you feel like paying it after the bankruptcy then go ahead, but you will not be obligated to.

Bankruptcy MYTH 6: Both you and your spouse have to file bankruptcy together.
Actually, you can file bankruptcy in Arizona together or separately. The choice is yours, but you must qualify to do so in certain chapters, for example, you must still either pass the means test, or be under the median income in a Chapter 7 bankruptcy. In many cases it makes sense for husband and wife to file together, but in some instances the spouse might not want to file.

Bankruptcy MYTH 7: You can only file bankruptcy once.
You can file for bankruptcy in Phoenix-Mesa, Arizona, as many times as you like, but there are some time limits. You can receive a discharge from Chapter 7 every 8 years. You can receive a discharge from Chapter 13 every 2 years. If you get discharged in a Chapter 7 you have to wait 6 years before getting a discharge from Chapter 13. If you get a Chapter 13 discharge then you need to wait 4 years to get discharged from a Chapter 7. However, there is no waiting period if your case is dismissed. You can file back to back should you choose.

Bankruptcy MYTH 8: If you file for bankruptcy, creditors can still harass you.
Not True. When a bankruptcy case is filed in Phoenix, Arizona, automatic protection is put onto you and all of your property instantly. Creditors are not allowed to contact you for any reason, which includes calling or even billing you. If they persist in harassing you, you do have remedies available through the Federal Bankruptcy laws.