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Bankruptcy Myths Busted
The average American knows very little about bankruptcy. Most
people probably are aware of bankruptcy's ability to dissolve
debt and give the debtor a fresh start. Some of the information
you might have heard is correct, but some is not. The purpose of
this article is to dispel some of the most common bankruptcy
myths.
1. Even if I file for bankruptcy creditors will still harass
me and my family.
This is absolutely false. Bankruptcy law provides for an
automatic stay. Simply, as soon as you file for bankruptcy a hold
is put on all your outstanding debts and any creditor attempts to
collect those debts. The law prohibits a debtor to attempt to
collect, possess, or even contact the debtor in regard to the
debt. If a creditor does not follow the rules, the debtor may
have an action in the form of punitive damages. Basically,
punitive damages are meant to punish a creditor for not following
the procedures set out in the bankruptcy code. Whether a debtor
has a cause of action against a creditor should be left to an
attorney to answer. However what you need to know is this; once
you file for bankruptcy, creditors must leave you alone or suffer
the consequences.
2. If I file for bankruptcy it may cause more family troubles
than I already have, maybe even divorce.
This is also false. There are two ways a debtor can file for
bankruptcy voluntary and involuntary. Voluntary filing is done by
the debtor. The debtor talks to an attorney or files a petition
pro se and gets the bankruptcy process started. In an involuntary
bankruptcy, the creditor forces the debtor into bankruptcy often
times unwanted by the debtor. Voluntary filing is the result of a
family discussing their options with each other and possibly an
attorney and making an informed decision on the merits. Divorce
is often associated with a bankruptcy with the latter filing.
Voluntarily filing for bankruptcy gives the debtor a chance to
set his terms and allows the debtor a free choice for the
bankruptcy.
3. If I file for bankruptcy the trustee will seize all of my
assets and sell them to settle my debts with creditors.
Again this is false. While it is one of the duties of a
trustee to sell assets in the estate, the trustee cannot
necessarily reach all of your assets. There are many factors that
must be examined before this happens. The type of bankruptcy as a
lot to do with how much the trustee can seize. For example, a
chapter 13 is a reorganization bankruptcy. Simply, the debtor
keeps the majority if not all of his assets, and forms a
repayment plan to satisfy interested creditors. Even in a chapter
7 filing the debtor gets to keep many assets. These are called
non-exempt assets. The debtor's house, car, clothing, furniture,
life insurance, etc. are all non-exempt assets. These are just a
few of the main assets. An attorney will be able to arm you with
the information you need to keep even more personal property a
debtor thought possible.
4. If I file for bankruptcy now, I will never be able to file
again.
Surprise, this too is false. Filing for bankruptcy does not
make you ineligible to file again. Without going into too much
detail, just know the bankruptcy code allows a debtor to file for
bankruptcy more than once. There are a few things different most
importantly possibility of discharge, however you can file for
bankruptcy again if you already have filed.
5. If I file for bankruptcy I will never get credit again.
This is simply false. If this were true then nobody would file
for bankruptcy. Americans depend on credit and this is no
different than a debtor who has filed for bankruptcy. Several
banks now offer credit on a secured basis to potentially risky
customers. The debtor would put up a small amount of money so as
to secure payment in the future. Once the debtor proves his
ability to pay, credit limits get higher. As little as two years
after a chapter 7, a debtor is eligible for mortgage loans on
terms equal to someone who has not gone through bankruptcy.
Creditors look more to a debtors stability, as opposed to the
fact you filed for bankruptcy.
Read more about bankruptcy at www.bankruptcyhome.com
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