Kentucky Bankruptcy Information:
Myths and misinformation swirl around bankruptcy.
Creditors will lie to keep you from filing bankruptcy. Your friends and relatives are not attorneys and don’t have the answers. These are 10 common questions/misconceptions.
1. Is bankruptcy still available
Filing Bankruptcy today involves a lot more paperwork and documentation but it hasn’t changed otherwise in the relief you get from what it was before the law changed in 2005. Private student loans are no longer dischargeable in bankruptcy but they can otherwise be made uncollectible. Counseling is now required. Some high earning individuals may have to file a Chapter 13 and repay part of their debts .
2. Can you file bankruptcy if you have a job
I have seen no one that couldn’t file a Chapter 7, 13 or Chapter 11. The “means test” was added in 2005 and forces 2-3% of debtors to file as a Chapter 13. You don’t have to earn a paycheck to file a Chapter 7 or a Chapter 13. But you must have some income to fund and make the payments in Chapter 13 and over 90% of the people qualify for a Chapter 7.
3. Can Medical debts be discharged in bankruptcy
Debt collectors must want to be lawyers because they love to say what the law is so much. However they are not lawyers. They are paid commissions on debts they collect. They are constantly being sued for attempting to collect debts by lying or treating debtors with disrespect. Almost every debt can be discharged in bankruptcy. Even student loans, taxes and child support can be discharge under certain exceptions.
4. Do Chapter 13 plans require full repayment of your debt
Chapter 13 plans can pay from 0% to 100%. The courts require the debtor to use their best efforts and for the Chapter 13 plan to repay at least what a Chapter 7 would. Some priority debts must be repaid in full. Chapter 13 is often a special tool to cure a foreclosure.
5. People who file bankruptcy can’t get credit for 10 years
Debtors often refinance or purchase a home while they are in Chapter 13. Debtors will get credit card offers days after they file. Normally you can buy a car at a normal rate one year after the discharge and a home two years later. The Fair Credit Reporting Act allows reporting a bankruptcy for 10 years but it isn’t relevant for credit within 2-3 years. A foreclosure or repossession is worse than the bankruptcy.
6. You lose everything you own in bankruptcy
It is actually very rare that anyone loses property. If you are honest with your lawyer about the assets and transfers you will know if you are at risk before you file. Exemptions protect your assets.
7. I am a bad person if I file.
Doctors, lawyers, judges and even bank executives file bankruptcy. Bankruptcy and even letting a home go back in foreclosure should be a business decision and not based on shame or guilt. 90 % of bankruptcy cases are due to unemployment, disability, or divorce. Bankruptcy is a fresh start from debts you can never repay.
8. Bankruptcy is why credit is so expensive.
Less than 2% of the public file bankruptcy every year. It isn’t the reason for 24% rates greed is. If bankruptcy wasn’t possible when you suffer a catastrophic loss no one would borrow which would make lending less profitable.
9. You have to owe a lot to file bankruptcy
If you can’t repay or if you just need time to repay bankruptcy is a tool. There isn’t a minimum amount to owe. We have filed a Chapter 13 over a 3,000 dollar debt to stop the sale of a home and to allow the 3,000 to be repaid .
10. Married couples must file together
If you are married you may file jointly but you don’t have to. If you file separately you still must supply the other spouse’s income information.