As a Bankruptcy Attorney in Sacramento, I hear all sorts of myths about the bankruptcy process. Here are some of the bankruptcy myths that I hear over and over again — and the real truth.
1. You Can’t Keep Your Car in Bankruptcy
A lot of folks think that they will need to surrender their car when they file bankruptcy. This is almost never the case. While a debtor has the option to surrender a car (because of a bad loan, for instance), in almost all cases, you do not have to surrender your car in a bankruptcy.
2. You Won’t Get Any Credit Cards for 10 Years
Bankruptcy will appear on your credit report for 7-10 years after you file. But this does not mean that you will not be able to obtain credit for 10 years. Most of my clients report that they receive credit card offers and auto loan solicitations immediately after their bankruptcy case is discharged. Be careful though: the credit offers you receive immediately after bankruptcy will probably have high interest and fees. So it pays to shop around.
3. Civil Court Judgements Can’t Be Included in Bankruptcy
A lot of my clients have dealt with financial issues for years prior to filing for bankruptcy. What gets them to file is the fact that one of their debts has gone to court and resulted in a judgement. As long as the judgement is unsecured, it can be discharged in a bankruptcy. If a creditor has put a judgement lien on your house, there are still options. Call me to discuss.
4. You Have to Surrender Your Tax Refund to the Court
This one has some truth to it. Under certain circumstances, a debtor must surrender their tax refund to the Bankruptcy Trustee. However, in most of my Chapter 7 cases, my clients are not required to surrender their tax refund to the Trustee. The bankruptcy exemptions that you use in your case will determine whether you get to keep your tax refund, so plan carefully.
5. Garnishments and Bank Levies Don’t Stop Until Discharge
This one is absolutely wrong! Wage garnishments and bank levies must stop immediately upon the filing of your bankruptcy. The “automatic stay” goes into effect the second that my office sends your bankruptcy paperwork to the courthouse.
6. Such-and-Such Debt Is Not Dischargeable
There are some sneaky and aggressive debt collectors who will tell you that their debt can’t be discharged in a bankruptcy. If you press them for details, they will shout out a bunch of nonsense. Listen to a professional: in all but the most extreme cases, your unsecured debt will be eliminated in a Chapter 7 bankruptcy. That’s the truth!
7. Your Debts Must Be At Least $X In Order to Claim Bankruptcy
While the number is always different, some people think that there is a minimum debt required to file for bankruptcy. This is not true. There is no debt minimum contained anywhere in the bankruptcy code. Each case is different, and the court will look to your individual circumstances to make sure that you aren’t abusing the bankruptcy process. If you’re are having trouble with your finances and can’t afford to repay your debt, it is a good idea to at least discuss your situation with a bankruptcy attorney.
If you have any questions about these bankruptcy myths or others, please call my office. I can be reached at (916) 333-2222.