Myth #1: I can never get credit again
Filing a bankruptcy is on your credit report for 10 years, however just because a bankruptcy is being reported on your credit report doesn’t mean you can never get credit. Usually as soon as you receive a discharge in bankruptcy you are eligible for loans, and in fact many subprime lenders solicit newly discharged debtors for high interest credit cards and signature loans because the creditor knows a Chapter 7 can only be filed once every 8 years.
Myth #2: I am going to lose my home
All states and the Federal Law allow persons filing a bankruptcy to protect a certain amount of equity in the home (equity is the difference between what the home is worth and what you owe on it). The Federal Government allows individuals who can’t claim a state’s exemption to protect $250,000.00 of equity in a home. Tennessee allows between $5,000.00 and $50,000.00 depending on age and whether you have minor children or custody of a minor child. Alabama’s homestead exemption is up to $5,000.00 and Mississippi’s exemption is up to $75,000. Even if your attorney believes you have too much equity to protect or exempt, a Chapter 13 may allow you to reduce your debt and still protect your home.
Myth #3: I will lose my vehicle, car, boat, truck or motorcycle if I file bankruptcy
Generally, as long as you are current on your vehicle loan, and you don’t have a lot of equity, your vehicle can be protected if you file a Chapter 7 bankruptcy. If you are behind on payments or have a lot of equity in your vehicle, a Chapter 13 can reduce the interest rate, monthly payment and allow you to cure what you are behind on the vehicle loan.
Myth #4: I don’t have to list my medical bills in my bankruptcy or you can’t list medical bills in a bankruptcy
All debts must be listed in a bankruptcy, including medical bills; usually all medical bills are discharged in a bankruptcy. In a Chapter 7 you can voluntarily pay back your favorite doctor if you want to, even after you have been discharged that doctor in your bankruptcy. In a Chapter 13 the hospital or doctor will receive whatever you can afford to pay on the medical bill. A hospital receiving federal money cannot refuse you service just because you listed the hospital in your bankruptcy.
Myth #5: I can’t discharge a utility bill in bankruptcy
All debts are listed in a bankruptcy filing so if you are behind on a utility bill it must be included in the bankruptcy. If your utility company is the only service provider available to you, which most are, the utility company cannot turn off service because you filed their debt in the bankruptcy. The utility company can only require that you pay another reconnection fee and/or security deposit to keep your service from being interrupted. Be sure to tell you attorney if you are behind on a utility bill when you meet with them.