Bankruptcy is deservedly considered an option of last resort, but many people frequently delay or completely avoid taking action because of oft-repeated but unfounded fears. Such misconceptions can lead to some people pursuing other, more damaging courses of action like debt management plans that are specifically advertised as alternatives to bankruptcy.
This article addresses a few of the most commonly held beliefs and fears our attorneys at Steiden Law Offices hear from clients on a regular basis. All too often, people unknowingly put themselves through several months or even years of unnecessary additional emotional and financial turmoil because of these misunderstandings.
Get the Truth About Bankruptcy from a Cincinnati Lawyer
Are you completely overwhelmed with debt? Have you been struggling every month to pay your bills? You can put an end to the relentless calls from creditors and get a fresh financial start by declaring Chapter 7 or Chapter 13 bankruptcy.
The experienced and compassionate bankruptcy attorneys of Steiden Law Offices have been helping clients in Ohio and Northern Kentucky for more than two decades. We understand your nervousness, and our firm will honestly discuss your case with you during a free, no obligation consultation as soon as you call today.
Overview of Northern Kentucky Bankruptcy Myths
- How much of my property will I lose if I file bankruptcy?
- Will I ever be able to get credit again?
- Can student loans ever be discharged in bankruptcy?
- Is my income too high for me to file bankruptcy?
- Why shouldn’t I max out my credit cards if I know I’m going to file?
- Where else can I find information about these myths?
Perhaps no myth gets repeated more often (and is thus believed by countless others) than the fear that filing bankruptcy essentially involves having to part with every single possession a debtor ever purchases.
Whether it is fears about losing a home, a car, or a baseball card collection, people refuse to consider bankruptcy because they are convinced they will lose all the items they call their own.
The truth is that the number of things most people are forced to part with is relatively minimal. In many cases, most debtors are not forced to give up anything at all.
This is because both Ohio and Kentucky allow people filing Chapter 7 or Chapter 13 to claim a large number of exemptions. Property that is classified as exempt cannot be taken by creditors.
A few of the exemptions that may be utilized include:
- Homestead Exemption
- Motor Vehicles
- Household Goods
- Retirement Accounts or Pensions
- Personal Property
- Tools of Trade
- Public Benefits
Federal wildcard exemptions can be applied as the debtor sees fit. A lawyer can help determine the most beneficial way to utilize every available exemption.
Actually, most debtors begin receiving credit card offers as soon as their case is closed. While a bankruptcy will indeed remain on a person’s credit report for roughly a decade, people will still be given multiple opportunities to rebuild their credit during this time.
Make no mistake, several companies extend credit offers precisely because people who have just filed bankruptcy cannot do so again for another eight years. It is imperative for any person emerging from Chapter 7 or Chapter 13 to manage these offers extremely cautiously so he or she does not get him or herself into another bad situation. But the myth that there is no way to ever again receive credit simply is not true.
It is certainly difficult to have student loans discharged in bankruptcy, but it is not entirely impossible. While the odds are generally slim, a hardship discharge may be justified in certain cases.
Although discharging student loans in bankruptcy proceedings in Cincinnati and the surrounding areas in Ohio and Northern Kentucky is rare, an attorney can help determine the most advantageous approach of dealing with that debt.
The attorney may be able to help you make the student loan payments can become much more affordable following a bankruptcy filing as a worse case scenario.
Many people believe that bankruptcy is exclusively reserved for those with little to no assets and incomes well below the poverty line. The implementation of means testing in conjunction with the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005 furthered the misconception that it would be all but impossible for people of higher incomes to file bankruptcy, especially Chapter 7.
While a person’s income can affect the type of bankruptcy that he or she can file, it very rarely prevents him or her from filing completely. Your salary over the prior six months is one factor, but so is your total debt—especially if you accumulated substantial debt while running a business.
Some people believe that they cannot file bankruptcy if they have any sort of credit available to them. Others convince themselves that as long as they’ll be seeking to have their debts discharged, they should get one last spending spree in.
The truth is that it is foolish and potentially damaging to add any unnecessary new debt shortly before you file. A trustee will review all transactions over the preceding six months. A debtor can be responsible for the purchase of any goods determined to be luxury items. In certain cases, these kinds of purchases can result in criminal investigations for alleged fraud.
The Truth About Student Loans and the Undue Hardship Discharge — As previously mentioned, many people believe student loans cannot be discharged in bankruptcy under any circumstances. In July 2011, an study by Harvard Business Law Review co-founder Jason Iuliano published in the American Bankruptcy Law Journal garnered attention for claiming that roughly 40 percent of borrowers who included student loans in their bankruptcy filings had that debt discharged. The truth lies somewhere in between, and this brief article from the nonprofit National Consumer Law Center provides a helpful overview of the truth about discharging student loans in bankruptcy.
Bankruptcy Fraud - Criminal Investigation (CI) — This Internal Revenue Service (IRS) article provides an overview of how the Bankruptcy Fraud Program of the agency’s CI unit works with the Department of Justice to investigate cases of bankruptcy fraud. In this IRS article, find links to examples of bankruptcy fraud investigations as well as statistical data tables.
Find a Bankruptcy Lawyer Knowledgeable with BAPCPA Laws
If you have been wondering whether filing bankruptcy might be in your best interest, do not base your decision on unfounded fears. Contact a knowledgeable attorney to get answers to all your questions as well as the truth about Chapter 7 and Chapter 13 bankruptcy.
Our bankruptcy law firm has offices conveniently located in Cincinnati and Covington in Ohio and Covington and Florence in Northern Kentucky.
The Cincinnati bankruptcy attorneys at Steiden Law Offices help clients in Hamilton County, Boone County, and Kenton County achieve much-needed financial relief so they can finally get fresh starts to their lives. Let us see how we can help you do the same by calling right now to schedule a free, confidential consultation.