In this, our second of a two-part blog series, we're talking about misconceptions with regard to bankruptcy - both Chapter 7 and Chapter 13.
Orange County Bankruptcy Attorney Vincent Howard has encountered numerous clients who hesitated filing for far longer than they should have, simply because they had bad information about what bankruptcy would mean for them.
We're taking the time here to address some of those misunderstandings and concerns.
In Part 1 of the blog series, we discussed who would know you filed, what you might lose and what you can hang onto, what to expect in terms of future credit and whether both spouses in a married couple must file.
In Part 2, we're going to look at bankruptcy perceptions, taxes and what it's all going to mean as you look forward.
1. You think that only deadbeats file for bankruptcy. The truth of the matter is the reason most people file has to do with a singular, life-altering event. This might be the death of your higher income-earning spouse, a lay-off or a major illness. Many people do try to pay their bills, but they find themselves struggling. Many even go so far as to delve into their savings and retirement (not a good idea) to try to pay it all off. What happens is you simply get to a point where no matter what you do, you're just never going to be able to catch up if you continue with the status quo. Bankruptcy becomes a chance at a clean slate.
2. You think that filing for bankruptcy will improve your credit rating because all your old debts will be gone. Sadly, this is one of the drawbacks of bankruptcy. Your credit will take a hit, and the mark will stay there for 10 years. However, this will not stop you from getting a loan, buying a car or a house or other measures. You just may need to be more selective about the debts you take on because the interest rates will be higher, at least for a while.
3. You think bankruptcy means you can't ever pay back the people or organizations you owe. Some people feel a great sense of obligation in this regard. While you must include all your creditors (including family members and friends) in your filing, there is nothing to stop you from repaying it, if you so choose, once you're back on your feet.
4. You think you can't get rid of your tax debt through bankruptcy. Ok, for the most part, this is true. However, there are always exceptions, if your due date for filing was at least three years ago, the return is at least two years old, there was no fraud involved and you aren't guilty of evasion. This is an option you'll need to discuss more thoroughly with Orange County Bankruptcy Lawyer Vincent Howard.
5. You think you can max out all your credit cards and then file for bankruptcy, thereby avoiding the responsibility to pay for those items.The truth is, that's called fraud. You can find the statute in 18 U.S.C. 157. Bankruptcy judges tend to REALLY frown upon it, and you could find yourself in handcuffs. Not worth it.
Of course, all of this is meant to serve as a general guideline. There is no substitute for a consultation with Orange County Bankruptcy Lawyer Vincent Howard.
Orange County Bankruptcy Attorney Vincent Howard at Howard Law is here to take your call. You can reach us toll-free at 1-800-872-5925 or send us a message online.
12 myths about bankruptcy, Staff Report MSN Money