Bankruptcy Myths

There are many myths about bankruptcy. We are happy to meet with you in a free, no-obligation consultation to answer any questions you have. Some common myths about bankruptcy include:

1. If you file a Chapter 7, you will lose your property.

For most Chapter 7 cases, this is not true. You are allowed to exempt or protect items (up to specified dollar amounts under Georgia law) like cash, money in bank accounts, household goods, furniture, clothing, jewelry, vehicles, residence and tools of the trade. Qualified retirement plans like 401(k) plans are completely protected. Many who file Chapter 7 are able to claim all their property as exempt/protected. Where you own property that is collateral for a loan, you may keep the property by continuing to make payments to the creditor.

2. The bankruptcy court will take your bank accounts and tax refund.

Not true. You are allowed to exempt up to $5,600 per person (or in a bankruptcy case filed by husband and wife, up to $11,200) in cash, bank account funds and tax refund. If you owe more than the amount you are allowed to exempt, your attorney can recommend other alternatives to you.

3. A Chapter 7 is worse on your credit than a Chapter 13.

Any bankruptcy may be reported in the public records section of your credit report.

4. If you file a Chapter 13, you have to pay everyone back.

Not true. In Chapter 13 cases, you propose a repayment plan according to your ability to repay what you owe. Your repayment plan will determine how much debt you repay. In most cases, you are required to repay the debt you can afford. At the end of the Chapter 13 case, you are given a discharge order from the Bankruptcy Court which wipes out unsecured debt that you were not able to pay during the case.

5. Bankruptcies are run in the newspaper.

Not true. This used to be true years ago but does not happen today. Those who receive notice of your bankruptcy are mailed notices from the Bankruptcy Court.

6. You will never be able to buy a house or a car if you file a bankruptcy.

Not true. After you complete your bankruptcy case, you should work to improve your credit score. This is a matter of using credit wisely. Your attorney can recommend ways to build your credit score. Many former bankruptcy clients have later qualified for loans to purchase a car, truck and house.