Seeking A Local Gilbert Bankruptcy Lawyer?
Common Bankruptcy Myths
Bankruptcy will ruin my credit.
If you’re reading this, chances are that your credit score is already low, or about to drop, because you’ve either stopped making payments on all of your debt or can no longer continue to do so. Delinquent payments and judgments result in seven years of negative reporting on your credit report. Filing bankruptcy hits the reset button on your credit, and you’re more likely to be approved for credit after resolving bad debt with a discharge than if you had not filed bankruptcy. Although a Chapter 7 bankruptcy stays on your credit report for ten years, and a Chapter 13 bankruptcy for seven years, that doesn’t mean your credit score will remain low for that time period. If you put in effort to rebuild your credit after bankruptcy, which typically begins with establishing a timely payment history on a secured credit card and working your way up to department store cards, unsecured credit cards, auto loans, etc., it’s possible to achieve a 700 or higher credit score with bankruptcy still on your record. See my article on tips for rebuilding your credit after bankruptcy.
Bankruptcy will prevent me from buying a house.
Once you’ve defaulted on debt payments, qualifying for a mortgage with a desirable interest rate is going to be difficult. Bankruptcy can get you back on course towards your dream of owning a home. Now that you aren’t burdened by unsecured debt like credit cards and medical bills, you may be able to save for a down payment. If you’re planning to use FHA or VA financing, which is generally easier to qualify for than a conventional mortgage, there is an automatic two year waiting period after bankruptcy. Conventional financing doesn’t have a required waiting period; however, depending on market conditions, you’re probably looking at a three year period before buying a house regardless of the type of financing.
I have to wait to file bankruptcy until I’ve fallen behind on payments.
You may file bankruptcy even if you are current on some or all of your debt payments.
If there are debts I want to continue paying, I can leave them out of the bankruptcy.
You must list all debts in your bankruptcy documents, even debts that aren’t dischargeable. Debts owed to family members and friends must also be listed; however, there is no prohibition against repaying debts discharged in bankruptcy should you choose to do so. At your 341 Meeting of Creditors, the bankruptcy trustee will ask you under oath whether you have listed all your debts in the bankruptcy schedules.
The Bankruptcy Court may decide not to grant a discharge.
As long as you are eligible for a discharge and comply with all the requirements for bankruptcy debtors, you shouldn’t have to worry about your discharge going through. It’s important to comply with the bankruptcy trustee’s request for documents and information, appear at the 341 Meeting of Creditors with proper identification and proof of social security number, file any unfiled income tax returns, turn over any non-exempt assets to the bankruptcy trustee if requested, and take the post-filing debtor education course. A competent bankruptcy attorney will fully analyze any issues regarding your eligibility for a discharge prior to filing the case to avoid an unpleasant surprise.
I will lose my house if I file bankruptcy.
As long as your house is protected by an exemption, and you stay current on any and all mortgage payments, you will be able to keep your house in a bankruptcy. The Arizona exemptions apply to your case if you’ve lived in Arizona continuously for two years prior to filing. Under the Arizona homestead exemption, the house you live in is exempt up to $150,000 in equity, or a maximum of $150,000 in fair market value when owned free and clear of mortgage liens. Married couples share the $150,000 exemption and do not receive $150,000 each.
I will lose my car if I file bankruptcy.
As long as your car is protected by an exemption, and you stay current on any auto loans and/or title loans secured by the vehicle, you will be able to keep your car in a bankruptcy. Assuming the Arizona exemptions apply to your case, you may protect up to $6,000 in equity in a motor vehicle, or fair market value if owned free and clear, and $12,000 if you’re disabled (license plate or placard required). When married, each spouse receives an exemption, and therefore a couple with Arizona exemptions can protect two vehicles with no more than $6,000 in equity a piece, or a single vehicle with a maximum of $12,000 in equity (if owned free and clear, these amounts are based on the fair market value). These exemption figures are doubled for each disabled spouse. Fair market value is generally determined by the kbb.com (www.kbb.com) private party valuation.
Filing bankruptcy makes me a bad person.
The concept of bankruptcy discharge—receiving a periodic release from debt—can be traced back to the Hebrew Scriptures. There are an endless number of life events that can lead to filing bankruptcy. Whether it’s illness, job loss, injury, divorce, a death, business failure, addiction issues, or human error, everyone deserves a fresh start. Let’s face it, in the current climate of massive student loan debt, expensive health care and child care, and relatively low wages combined with a high cost of living, it’s tough to make ends meet. Most of us are familiar with President Trump’s business bankruptcies, but here are some bankruptcy filers that may surprise you: Abraham Lincoln, Ulysses S. Grant, Walt Disney, Henry Ford, Mark Twain, Oscar Wilde, Francis Ford Coppola, Burt Reynolds, Cindy Lauper, Meatloaf, Mick Fleetwood, Mike Tyson, and Dave Ramsey…the list goes on and on. Hard times can fall on anyone, even those of us who experience great financial success. Bankruptcy exists to help you get past the bad breaks and move on with your life.