Robert J. Adams and Associates
Myths and Lies About Bankruptcy
Filing any form of Bankruptcy is a serious matter. It should not be taken lightly. There are times when good folks just get too far in debt to be able to handle it. The banking industry generates myths and lies to prevent or delay individuals from filing Bankruptcy. Why? Because they want to squeeze after last penny they can out of financial hurting people.
Bankruptcy Is for A Person Who Doesn’t Want to Pay Bills.
Almost all of clients are tried to work payments with their creditors. Most creditors, however, are inflexible. Why? Because laws outside of Bankruptcy favor creditors. The can among other things:
- Sue you;
- Garnish your wages and bank accounts;
- Seize your property;
- Harass you, your family, your employer, and your neighbors;
- Lower your credit score.
Married Couples Must File Together
No. It is an option. One spouse can file Chapter 7 or Chapter 13 while the other spouse does not have to file a bankruptcy.
You Will Lose Your Property
Illinois has exemptions to allow you to keep property. In the rare situation where your personal property exceed allowed exemptions then Chapter 13 is a viable alternative to Chapter 7.
What if There Is Equity in My Home?
Our law firm has many clients who file Chapter 7 even if they have equity in their home. Or, if too much equity: consider Chapter 13. Many of our homeowner Chapter 13 clients pay a low dividend to unsecured creditors.
Bankruptcy Can Actually Save Your Property
Bill collectors will say you can’t file bankruptcy. Or, they will claim you will lose their property.
Car finance companies have liens on cars. If you fall behind they car repossess your car. Chapter 13 can save your car. You pay the balance over a period of 3 to 5 years and usually at a much lower interest rate.
If you are behind on your mortgage and even if there is a foreclosure you might file Chapter 13. The arrears (the amount needed to be current) can be repaid over a period of 3 to 5 years.
Bankruptcy Is an Admission of Failure or Is Immoral or Unethical.
Millions of Americans have filed bankruptcy. It can give them a “fresh start” and a way to build a new more secure life. The use of our Bankruptcy laws has saved property like cars, homes, and businesses.
Bankruptcy Is the End of The Road
Really? Was it the end of the road for Henry Ford, Walt Disney, and the Chocolate King: Milton Hershey? They built empires after filing for Bankruptcy.
Donald J Trump has had at least five (5) of his businesses file for bankruptcy. He says it is a tool in your financial tool box.
After filing bankruptcy are clients see their credit scores rise.
Filing for Bankruptcy Is Difficult or Not Possible
Bankruptcy lawyers know obstacles and traps in the law. They know how to navigate the bankruptcy laws.
The credit industry puts out “fake news” that you can’t file bankruptcy. Bankruptcy lawyers know the dos and don’ts of law; and what you do and can’t do. Generally, their advice is Complimentary: take advantage of them.
Are All Debts Are Eliminated & Discharged in Chapter 7?
Certain debts are not eliminated through Chapter 7. Some examples include:
- Most student loans;
- Parking and red light tickets; (We have separate articles and videos on Chicago parking tickets.)
- Illinois tollway debts;
- Some (but not all) income tax debts
- Back child support.
Also, there are debts where there are liens like cars and homes if you wish to keep them.
Sometimes a Chapter 13 is better than a Chapter 7 for you.
You Can only File Bankruptcy Once
False. There are certain time limits for Chapter 7. But, Chapter 13 is always available.
Everyone Will Know I Filed Bankruptcy
In the Chicago area the Chicago Law Bulletin lists all recent bankruptcy filing. Only certain professional read this section of the paper. Neither your friends nor neighbors read the Law Bulletin list of filings.
I Make Too Much Money to File Bankruptcy or I Don’t Make Enough Money to File Bankruptcy
Congress has imposed a Means Test for filing Chapter 7. Only a small number of people have the income to go past the initial part of the test. Even if your income is higher than the Means Test, there are ways around it. There are many deductions allowed. Experienced lawyers have defeated or lessened the effects of the Means Test.
Bankruptcy Stops You from Getting New Credit
- Credit scores rise after filing Chapter 7.
- Many of our past clients now have credit scores in the 700’s.
- Many of our clients have bought and financed a car few days after filing Chapter 7.
- We hear from past clients who are now homeowners.
You Cannot Discharge Income Tax Debts (IRS)
This is a common misconception. Generally, Income Taxes that are more than 3 years old from the date due will be discharged.
There are rules on what can and cannot be discharged. Experienced lawyers know these rules.
For the most part student loan debts are not dischargeable in Chapter 7 or in Chapter 13.
If you file Chapter 13 collections will stop until the end of the case.
Chapter 13 Requires that You Pay All Your Bills Back in Full
Not true. Most of our Cheaper 13 clients pay a small dividend to unsecured creditors. Many pay only 10%.
Is It Wise to Cash out A 401(K); Pension, or Ira Before Filing Bankruptcy?
The answer is NO! NO! NO!
Qualified pension plans are exempt from attachment when one files for Bankruptcy relief.
If you “cash” out a qualified pension plan you convert an exempt property into to a non-exempt property. In other words you could lose your money.