Bankruptcy Myths – Get The Facts About Tennessee Bankruptcy
Many people refuse to consider filing for bankruptcy, even when they should. Often, this is because they have heard horror stories that are based loosely in fact or on other people’s situations that are not similar to their own.
I am attorney April Perry Randle. Through my legal practice, I help people learn the facts about personal bankruptcy so they can make sound decisions about relieving their debt burdens.
Let me dispel your fears about your financial prospects. For more information or a consultation for to discuss your situation with a bankruptcy lawyer, contact me online in Chattanooga, Tennessee. You may also reach me by calling 423-464-6908.
Tennessee Bankruptcy Information: Dispelling Bankruptcy Myths
Myth: If I file bankruptcy, I will lose my house and my car(s).
Fact: In both Chapter 7 and Chapter 13, you have options to keep your house and your vehicles.
Myth: If I filed for bankruptcy in the past 10 years, I cannot file bankruptcy now.
Fact: Even if you have filed a Chapter 7 bankruptcy or have received a discharge from your debts in a Chapter 13 plan within the past few years, you may still be eligible to file under Chapter 13, which gives you some options to retain your house and vehicles and eliminate credit card debt and medical bills.
Myth: If my mortgage company has sent me a letter indicating that they are starting foreclosure proceedings or if my house has been published in the newspaper, there is nothing I can do to save my house.
Fact: If you qualify to file Chapter 13, a bankruptcy filing STOPS a foreclosure sale. In fact, bankruptcy can stop a foreclosure sale as long as the bankruptcy is filed any time BEFORE your house is sold on the courthouse steps. The sooner you file, the less money your mortgage company can charge you in relation to the foreclosure process, so it is best to seek advice as soon as you become delinquent on your payments.
Myth: If I file bankruptcy or fail to pay my debts, I can go to jail or face criminal charges.
Fact: Simply filing bankruptcy or not paying consumer debt does not subject you to criminal charges.
Myth: If I have voluntarily returned my automobile or house to the creditor, they cannot sue me or hold me responsible for the loan.
Fact: Unless you have signed a written contract with the creditor forgiving any balance that is owed once the property is returned, creditors are allowed to sell the property you return and look to you to pay any amount they don’t receive from the sale.
Myth: Creditors can garnish my wages, take my personal property or take money from my bank account if I don’t pay them.
Fact: It is true that creditors may garnish your wages after obtaining a judgment against you or they may take some personal property you own outright and/or take money from your bank account. Bankruptcy stops lawsuits, garnishment and repossession of your property!
Myth: I cannot afford to pay my debts, so I cannot afford to file bankruptcy and pay an attorney to help me.
Fact: Under Chapter 13, you can pay the majority, if not all, of your attorney fees and the court filing fees over time with no money up front. In a Chapter 7, you can request to pay the court filing fee over time and our office accepts payment arrangements that make bankruptcy affordable on almost any budget.
Myth: If I have equity in my home, I am not eligible to file bankruptcy.
Fact: Depending on your circumstances (including age, whether you are filing with a spouse and whether you have minor children in your home), bankruptcy laws allow you to have anywhere from $5,000 to $50,000 equity in your home. If you have more equity in your home than is allowed, you may still be able to file a Chapter 13 bankruptcy and create an affordable repayment plan while protecting all of your belongings.
Myth: My bank/credit union would not refinance my car; therefore, I don’t have any options to lower my payments.
Fact: Chapter 13 offers you alternatives regarding your car payment and may allow you to “refinance” your automobile loan over a new three- to five-year period that lowers your payment and often the interest rate.
Myth: I cannot include IRS debt, student loans or child support in a bankruptcy.
Fact: Tax debt, student loans and child support are types of debt that you typically cannot erase or discharge with a Chapter 7 bankruptcy filings; however, in a Chapter 13, you have many options for repaying these debts under better terms than those offered outside of bankruptcy.
Myth: There is nothing I can do to stop collection calls, collection letters and threats of lawsuits.
Fact: By filing either Chapter 7 or 13 bankruptcy, federal law mandates the “automatic stay,” which means that creditors MUST stop calling you or sending you late notices. The automatic stay also stops foreclosure sales, wage garnishments and most lawsuits.
Myth: If a creditor has sued me and has a judgment against me, I cannot include this debt in bankruptcy.
Fact: Judgments against you can be included in bankruptcy and the bankruptcy filing will stop further collection activity against you such as wage garnishment.
Myth: I pawned my car title and used my household items to get a loan from a finance company, so I am stuck paying those high interest rates.
Fact: In Chapter 13, you will likely be able to lower or eliminate interest rates on title pawn transactions. If you have used a list of household items (such as TVs, furniture, appliances) that you owned before you received the loan, you can likely repay these loans in a Chapter 13 bankruptcy at zero percent interest, and you can keep the items you listed in the loan application. This may be the case in a Chapter 7 bankruptcy as well, depending on the particular circumstances of your loan.
Myth: If I file bankruptcy, my employer will fire me.
Fact: Federal laws state that government and private employers are not allowed to fire you or take any other negative action toward you simply because you file for protection under the bankruptcy laws. This applies even if the employer is required to withhold payments from your paycheck to pay your debts in the bankruptcy.
Myth: I have income from Social Security or disability, so I am not eligible to file bankruptcy.
Fact: If you have any kind of regular income, you may qualify to file bankruptcy.
Myth: Chapter 7 allows me to pay less than I would if I repaid my debts through a Chapter 13 bankruptcy.
Fact: Many times a Chapter 13 repayment plan allows you to pay less than you would pay if you wipe out all of your “unsecured” debt (medical bills, credit cards, finance companies, signature loans) through a Chapter 7 bankruptcy. By lowering interest rates, car payments and stretching late payments over a period of time, a Chapter 13 may be right for you.
Myth: If I file bankruptcy, I won’t be able to keep my tax refunds.
Fact: Chapter 7 cases are finalized in most cases in approximately three months; therefore, you will not likely lose your tax refund even in the year that you file. In Chapter 13, the Eastern District of Tennessee allows you to keep tax refunds as long as you pay your unsecured creditors at least 70% of what you owe them.
Additionally, if you have to surrender tax refunds in Chapter 13, in our filing district you may still be able to keep a tax refund if it is due to child credits or earned income credits as opposed to overpayment of federal income taxes.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.