Five myths about chapter 7 bankruptcy

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    15-Aug-2015

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  1. 1. Five Myths About Chapter 7 Bankruptcy As the American economy continues to stagnate, the number of Chapter 7 bankruptcy filings has risen as a whole. However, along with the increase in filing, there have also been many myths propagated that dont tell the whole truth about the process. The Dowe Law Firm would like to use this post to debunk the most pervasive myths about bankruptcy. Myth #1. Most people who file for bankruptcy are financially irresponsible. The wording makes this one untrue, and it opens debtors up to a wealth of criticism. There are, of course, some people who file for Chapter 7 bankruptcy who have no impulse control, who fit the popular profile of the libertine blowing their savings. A Forbes piece that discusses the causes of bankruptcy lists poor use of credit at No. 3, but lists two other causes, medical expenses and job loss, as more common causes. And a Harvard study conducted by then-Professor, now-Senator Elizabeth Warren showed that over half of all bankruptcies are related to a sudden illness or medical emergency. Myth #2. All your debts are discharged in a Chapter 7 bankruptcy. This is untrue because there are certain debts that are not dischargeable as a matter of law. 11 U.S.C. 523 lists debts that are exceptions to discharge. Some examples are student loans, debts incurred as a result of fraud, certain taxes, and domestic support like alimony or child support. It is important that your attorney educate you on the debts you will not be able to eliminate in Chapter 7. Myth #3. If you spend a lot of money right before you intend to file, you will not have to pay it back. This is untrue and irresponsible. Under many states bankruptcy code, it actually amounts to fraud - if you spend large sums of money right before you plan to file bankruptcy, the implication is that you know you will be unable to repay that money. That is deceptive and meets the common-law standard for fraud. And as stated in explaining Myth #2, debts incurred as a result of fraud are non-dischargeable. Myth #4. Both spouses in a couple must file Chapter 7; a spouse cannot file alone. False. Your marital assets might wind up as part of your filing if you live in a state with community property, but your spouse has no obligation to file along with you. Your bankruptcy trustee might want to see evidence of your spouses income, if there is any, to
  2. 2. make sure it is in keeping with their occupation and not artificially inflated by hiding your assets. But that is the only reason your spouse should have to get involved in your filing. It is somewhat unusual to file alone, but there is no law prohibiting it. Myth #5. Bankruptcy will ruin your credit for at least ten years. False. What often happens is that people get confused over the length of time bankruptcy will remain on your credit report. Credit reporting agencies keep a bankruptcy on your record for ten years. This does not mean you will be unable to rebuild or improve your credit during that time. Credit card offers for recently filed debtors are actually quite common - they know that you will not be able to file again for a set period of years, and are hoping to hook you with high interest rates. The Dowe Law Firm has experience with all types of bankruptcy, and we can help you set the record straight. Call us today. We serve Contra Costa, Solano and Alameda counties. For More Information, please visit : Dowebankruptcylaw.com