We are experts at providing bankruptcy advice, but we’ve also heard our fair share of advice that has been given to people from other sources. Here’s a collection of them for your amusement.
Bad Bankruptcy Advice
1. Bankruptcy will ruin your credit
Filing a bankruptcy does impact your credit score, but, if you are looking at bankruptcy as an option, it is very likely that your credit score has already been affected by previous debt. If it hasn’t yet, it will definitely happen in the future if you are late on any payments. The bankruptcy’s negative credit score impact is a small trade off to completely discharging your unsecured debts. When you get rid of all your debt, you eliminate the risk of getting late payment marks on your credit record which will have long term effects on your score. If your credit score is already low, a bankruptcy is the best way to stop the bleeding. You shouldn’t worry about the bankruptcy affecting your credit score when you have debt that is leaving negative marks on your credit with every single month’s late payments. A bankruptcy puts an end to all of that. In reality, the bankruptcy is what allows you to completely recover from your debt. It gets rid of your debt so that you can start to improve your credit score. Even thought the bankruptcy will appear on your credit report, it does not mean that you can’t improve your credit scores. In fact, your credit score will improve faster with all of your debt eliminated after a bankruptcy than if you would go on to try to go without filing bankruptcy.
2. You make too much money to file for bankruptcy
First, the median income level qualification is based on how many people you support in your household. Secondly, bankruptcy has options for people that make too much to qualify under the median income levels of Chapter 7 bankruptcy. There is a means test that allows you to compare your income to your expenses to see if you are under water on a monthly basis. Another option if you are filing for business debt is to file a non-consumer debt Chapter 7. And finally, a Chapter 13 is actually designed for people who make too much money to file a Chapter 7. If you have some expendable income, a Chapter 13 may be the way to go for you.
Learn more about Chapter 7
Learn more about Chapter 13
3. You’ll never be able to get a loan if you file for bankruptcy
Why would a bank lend you money when you’ve got a bankruptcy on your record? They know you can’t file a Chapter 7 bankruptcy again for 8 years. Your local auto dealers probably don’t even care if you filed a bankruptcy two months ago because most of their loans are only 5 to 7 years. It’s easy to research this one for yourself. You can call an auto dealer or call a mortgage broker and ask this simple question: How long do I have to wait after I file a bankruptcy until I can get another car loan or home loan? Many auto finance companies will give you loans. Home loans are usually available 3 years after a bankruptcy. Credit card offers will come in almost immediately after you file if you keep a clean credit record, but who needs more credit cards? The better answer is to stay away from debt after you file a bankruptcy. Find a way to keep things simple for a while.
4. Bankruptcy should be avoided at all costs
Let’s illustrate an answer to this bankruptcy advice with a scenario. Let’s say you have $10,000 left in your bank. You also have a pending bank account lien that could take a good chunk (probably 25%) of that amount each month until the debt is paid. Also, your debt is $50,000. Your income level qualifies for Chapter 7 bankruptcy where your last $10,000 of money will be protected by an automatic stay when you file the bankruptcy? Still want to avoid filing bankruptcy at all costs? Sometimes avoiding filing bankruptcy results in a cost that you shouldn’t have to face.
5. You should try debt consolidation before filing bankruptcy
Debt consolidation is a “maybe” solution. Debt consolidation companies are under the mercy of your creditors. If your creditors don’t want to play ball with the debt consolidation company to help resolve your debt at a lower rate, then there’s absolutely nothing the debt consolidation company can do about it. This is the reason it is a “maybe” type of solution: Maybe they can do something with your debt, or maybe they can’t. A bankruptcy is an “absolutely” type of solution. Can bankruptcy discharge unsecured debt? Absolutely.
6. You don’t need a lawyer to file a bankruptcy
You can fill out the paperwork yourself. You can take the paperwork to the court to get filed yourself. You can attend the court date yourself. Sure, you can. What if you filled out the paperwork wrong? What if you didn’t analyze the situation properly and you end up losing your home in a forced sale by the bankruptcy trustee? What if there are rules that put your savings and other assets at risk to pay off creditors in the bankruptcy? What if a creditor files a complaint against your bankruptcy during your court date? If you know all the rules and have enough experience with bankruptcy to avoid any issues, you probably don’t need a lawyer or you probably are a lawyer! If you want to make sure to avoid the issues above and the many other potential problems that can happen when you don’t know your way around a bankruptcy filing, use an attorney.
Bankruptcy Law Professionals is a bankruptcy law firm servicing clients in Orange County, Riverside County, San Bernardino County, and Los Angeles County in Chapter 7 and Chapter 13. Contact us at (855) 257-7671 for a free consultation.