Bankruptcy isn’t for everyone, but it might be the best solution for you. You probably found this post because you are researching your debt-relief options. Good for you! Major decisions about your financial future should never be made hastily.
If you have been dealing with debt problems, you have probably received a lot of information about bankruptcy from family members, friends, and debt collectors. Unfortunately, much of that information is actually MISinformation. While the friends and family members may simply be unaware of the facts, some debt collectors will blatantly lie to you. Here are some of the more common misconceptions about bankruptcy that I’ve heard from clients:
“I don’t owe enough debt to file.”
Fact: There is no minimum amount of debt required before you are allowed to file bankruptcy. However, if your debt load is relatively small, a bankruptcy alternative might be in your best interests.
“I make too much money to file.”
Fact: Just as there is no minimum amount of debt required, there is no amount of income that precludes one from filing for bankruptcy. A simple Internet search can reveal many bankruptcy filings of the rich-and-famous. If you make more than the median income for a similarly-sized household, a presumption of abuse may arise if you try to file a Chapter 7 bankruptcy. Even if your income is above median, the presumption may not arise, depending on the amount and nature of your debts. Finally, if the presumption of abuse arises and you cannot rebut it, Chapter 13 will likely be available to you.
“I’ll lose my house/car/boat/motorcycle/etc. if I file for bankruptcy.”
Fact: Most people don’t lose anything in bankruptcy. See THIS POST for the reasons why.
“I can’t file for bankruptcy because the collection guy on the phone told me I will go to jail!”
Fact: Debtors’ prisons are a thing of the past, but that doesn’t stop some unscrupulous debt collectors from trying to scare some money out of you. Assuming you didn’t take the credit with no intention of repaying it, the collector is bluffing.
I’ll post more bankruptcy myths next time. If you’ve heard something about filing bankruptcy and are wondering whether or not it’s true, send it to me and I might address it in Part 2.