Filing for bankruptcy in Nebraska is already a stressful situation. You are not only trying the best you can to move forward, but you are presented with a lot of misinformation. Here are the top five bankruptcy myths, and the actual facts.
Myth: You will lose all of your possessions when you file for bankruptcy.
Fact: In almost all cases, your personal property will remain with you. There are a number of allowable state and federal exemptions that designate personal items as exempt from your creditors. You will also be able to keep things like pensions and insurance to the extent allowed by law. An experienced attorney will know the best way to designate your property so that you can keep them.
Myth: Filing for bankruptcy will destroy your credit forever.
Fact: A bankruptcy is expunged from your records within 10 years. Most bankruptcies are removed from your credit history sooner. While your credit will take a hit, it probably already has, and there are credit card companies who will send you offers a year or so after your bankruptcy. You may be able to qualify to purchase a home in about 2 years. Once you have filed for Chapter 7 bankruptcy, you are prohibited from filing another Chapter 7 bankruptcy to discharge your debts for another 8 years, so some creditors will consider you a good risk.
Myth: A bankruptcy wipes away all your debts.
Fact: While filing for bankruptcy can eliminate many of your debts, there are certain debts that generally are not discharged. Among those are alimony and child support; certain taxes; student loans; and debts or loans that you obtained through giving false information. The bankruptcy court will determine what debts can be discharged under Chapter 7. Under Chapter 13, you will be working out a payment plan with your creditors.
Myth: Your employer will be notified if you file for bankruptcy.
Fact: Your employer is not notified when you file for Chapter 7 bankruptcy. While a Chapter 7 bankruptcy filing is a matter of public record, no one will contact your employer and inform them that you are filing a petition. On occasion, a Trustee will have to contact an employer to verify income statements, but this seldom happens. In a Chapter 13 bankruptcy, your plan payments will likely be withheld from your wages.
Myth: It’s impossible to file for bankruptcy now.
Fact: While it is more difficult to qualify for a certain type of bankruptcy, you do have options. In 2005, Congress amended the Bankruptcy Code with the Bankruptcy Abuse Prevention and Consumer Protection Act [BAPCPA]. This created more paperwork for filing, and made filing for Chapter 7 [straight or liquidation] bankruptcy more difficult to do. However, you may still be eligible to file for a Chapter 13 [reorganization] bankruptcy, where you would negotiate with your creditors about repayment options to pay off your debts in three to five years.
If you still have questions about whether something you’ve heard is a bankruptcy myth or fact, contact us at Steffens Law Office for a free consultation.