Bankruptcy Myths DEBUNKED

MYTH # 1: I’ll lose everything including my home and my car.

On the contrary, Federal Law provides very generous “exemptions” that permit debtors to protect their property from seizure or liquidation. Even if your property value exceeds the allowable exemption amount, you can still file for bankruptcy and benefit from reorganization. At the Law Office of Leah E. Capece, we have years of experience protecting assets from seizure.

MYTH #2: Bankruptcy will ruin my credit and I will never get credit again.

While bankruptcy filings are reported on your credit history, what you do after bankruptcy can be just as important. Lenders look at a variety of factors in determining whether to make a loan, and a history of bankruptcy is only one of them. Also, many people have such substantial debt, that in some cases bankruptcy has improved their credit! At the Law Office of Leah E. Capece, we don’t just file bankruptcy, we counsel our clients on how to rebuild credit and provide all of the necessary tools for getting back on track.

MYTH #3: If I file bankruptcy, my spouse will have to file also.

Although there are many reasons why married couples may benefit from filing jointly, there are sometimes good reasons for only one spouse to file. This is completely permissible under the law. At the Law Office of Leah E. Capece, we can help you determine the best course of action, and counsel both you and your spouse.

MYTH #4: I have to default on my payments in order to be eligible for bankruptcy.

It’s true, most people haven’t made a payment toward their debt(s) in many months, or even many years before they decide to file bankruptcy. However, if you have suffered a financial hardship and you know that you will soon be unable to pay your debts, you should not wait. Procrastinating often leads to lawsuit, judgments, wage garnishment, repossession, foreclosure and other involuntary collection. Being proactive can help to avoid the surprise and embarrassment of repossession and other forcible actions. Also, if you file sooner, you may be able to avoid late and missed payments being reported to your credit report. At the Law Office of Leah E. Capece, we can help you explore all of your options and file quickly to avoid surprises.

MYTH #5: Filing bankruptcy makes me a bad person and a failure.

This could not be the furthest thing from the truth. The law provides a mechanism to help people who need a break. Many people find themselves in need of bankruptcy due to no fault of their own. Death, disability, divorce, illness or injury are just a few of the major life events that can occur unexpectedly and result in a substantial loss of income, leading to bankruptcy. Bankruptcy can provide you with the fresh start you need. At the Law Office of Leah E. Capece, we believe that everyone deserves a second chance. We understand that you’re a good person in a bad situation and want to make the law work to your benefit.

MYTH #6: I will have to go to court and face all of my creditors.

The only required appearance in most bankruptcy cases is the “341 Meeting of Creditors.” The meeting does not take place in a courtroom and there is no judge or jury. While the name suggests that creditors will be present, the great majority of cases proceed without any appearance by the creditors. The court appoints a trustee to act on behalf of the creditors, thereby making attendance at the meeting unnecessary and uneconomical for most creditors. At the Law Office of Leah E. Capece, we keep you informed every step of the way to ensure there are no surprises in your case. We also prepare you for your meeting and attend with you.

MYTH #7: Bankruptcy can’t stop foreclosure.

Bankruptcy law offers various tools to address mortgage debt and foreclosure. In some cases the home does have to be surrendered, however, bankruptcy slows the foreclosure process. Bankruptcy can prevent or delay the sheriff’s sale, allowing time to explore a mortgage modification with the bank or allowing for a more orderly removal from the home. The “automatic stay” essentially “freezes” collections, including lawsuits, sheriff’s sales, evictions, repossessions and wage garnishments. At the Law Office of Leah E. Capece, we utilize all tools at our disposal to give you a chance at saving your home.

MYTH #8: I filed bankruptcy in the past, so I can’t file again.

Actually, the law specifically provides for successive bankruptcy filings. Depending on your previous case, you may be able to file again in as little as 2 years. At the Law Office of Leah E. Capece, we can verify your past filing and advise you on your next eligibility date.

MYTH #9: Debt consolidation is a safer option.

I am always worried when I hear a client tell me that they are going to try debt consolidation. My experience has been that most of these agencies are not honest with their clients; not honest about fees and costs, not honest about their services, and not honest about the potential results and consequences. Debt consolidation is also very risky because unlike with bankruptcy, most creditors do require that you default on your payments for 2-4 months before they will discuss settlement. However, during this time, the debt can be sold or sent to a collection attorney for immediate action. Debt consolidation does not protect you from lawsuits, judgments or repossessions. Finally, debt consolidation requires that your creditors voluntarily cooperate with the process, which often leaves you making large monthly payments toward only a fraction of your debts. At the Law Office of Leah E. Capece, we can walk you through all of the options and will thoroughly explain all of the potential risks.

MYTH #10: Bankruptcy will eliminate all of my debt.

The law classifies debts into 3 primary categories: unsecured nonpriority, unsecured priority, secured. Depending on which type of debt you have, some of it may be “nondischargeable” which means that bankruptcy will not eliminate those debts. For example, student loans, child support/alimony and some taxes are nondischargeable. However, credit cards, medical bills, personal loans, debts resulting from previous foreclosures and repossessions are all dischargeable in bankruptcy. At the Law Office of Leah E. Capece, we will help you identify which types of debt you have and prepare you for repayment of those debts that cannot be discharged.

MYTH #11: I make too much money to file bankruptcy.

No matter how much or how little you earn, there is a bankruptcy option for you. Higher income debtors can utilize Chapter 13 to reduce debts and pay them off quickly with one easy monthly payment. At the Law Office of Leah E. Capece, we will determine which chapter of bankruptcy is right for you, and help you propose a reasonable and workable repayment plan.




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