Bankruptcy Myths: Seperating Fact From Fiction

Seperating Fact From Fiction

Bankruptcy Myths

As consumer bankruptcy attorneys we often have to address a number of questions or concerns regarding bankruptcy myths from prospective clients at their initial consultations. Many times clients are initially hesitant about bankruptcy because of the different rumors or myths they have heard from friends or family.

During our initial free consultation, our attorneys will answer any bankruptcy questions or concerns you may have. We will explain the bankruptcy law as it applies to those questions or concerns, and whether it impacts your unique financial situation. In short, we will help you seperate fact from fiction with respect to bankruptcy.

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Common Myths About Bankruptcy 

Most of the bankruptcy questions or myths that our bankruptcy attorneys address relate back to the Bankruptcy Abuse Prevention Consumer Protection Act (BAPCPA) of 2005. This legeslative act made several significant changes to the United States Bankruptcy Code, and has generated a number of questions and concerns from prospective clients that are interested in filing for bankruptcy.Listed below are some of the most frequent questions we receive: 

Myth 1: medical bills & credit cards can no longer be wiped out or discharged

This of course, is wrong. Medical bills and credit cards will continue to be the most common types of debt discharges by all types of bankruptcy under the bankruptcy reform law. There are no limitations on the amount or type of medical bills or credit cards that a client may include in his or her bankruptcy.

myth 2: you can't file for bankruptcy if you own a home or more than one car

There are no restrictions about the number of homes or cars you may own before you may file. The real issue that must be addressed is whether any of those assets would be lost in a Chapter 7 proceeding because its value or “equity” may be beyond the amount that our state law allows you to exempt and protect from creditors.

myth 3: you can no longer stop home foreclosures or reduce car payments

One of the most powerful aspects of the bankruptcy process is the ability to stop a foreclosure and allow a person to catch up on their missed mortgage payments over time if they have fallen behind. Secured debts that include car loans may still be adjusted and restructured to make them more affordable. This extraordinary power remains unchanged.

myth 4: bankruptcy permanently kills your credit

Filing for bankruptcy does not completely terminate your credit. You can expect to have limited access to new credit initially after filing, but the effects are not permanent. While the filing of a bankruptcy will appear on your credit report for seven to ten years, the impact of filing will lessen throughout those years. According to a report from the Federal Reserve Bank of Philadelphia, those who filed for Chapter 7 bankruptcy in 2010 had an average credit score of 538. In the six to eight months it took bankruptcies to be finalized, their scores jumped up to an average of 620.

Top Bankruptcy Facts

Before filing for bankruptcy there are many factors to consider. One of the reasons that we offer a free consultation at Cox Law Group, PLLC is to take the time to explain all of the benefits and burdens of a potential bankruptcy filing. Bankruptcy offers many people the debt relief they need and a fresh financial start.

Fact 1: there's more than one type of bankruptcy

Before making a decision on filing for bankruptcy there are different options to consider under the bankruptcy code. The two most common bankruptcy filings for individuals are chapter 7 and chapter 13. Filing chapter 7 generally allows debtors to discharge the majority of their debts and wipe the slate clean. Chapter 13 bankruptcy allows individuals to reorganize their debt and make payments to their creditors over an extended period of time.

fact 2: the amount of money you make matters

When filing for bankruptcy the amount of money you make matters. Anyone can file for bankruptcy, but your income helps determine what chapter you qualify for. Chapter 7 bankruptcy has income requirements, meaning if you make too much you may have to file for Chapter 13 bankruptcy.

fact 3: Filing bankruptcy can be complicated and time-consuming

When Congress passed bankruptcy reform back in 2005, it imposed a multitude of paperwork requirements, documentation and extensive proof of assets and their values that must be presented in every case. It’s more important than ever to get the help of an experienced bankruptcy attorney to help guide you through the process because of the many different requirements that clients face under the new law.

fact 4: Filing for bankruptcy is affordable

Despite the increased costs of mandatory debtor education and counseling course requirements under the bankruptcy code, bankruptcy is still affordable. At Cox Law Group PLLC we strive to offer affordable flat fees and work with each client individually to come up with payment options.

Contact Us

We offer a free, confidential consultation at any of our 5 office locations throughout Central Virginia, and are also available by video conference via FaceTime, Skype or GoToMeeting. When you call our firm, your initial consultation with us is free, so you have nothing to lose by taking the first step today.

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Cox Law Group PLLC

Cox Law Group is proud to be a Debt Relief Agency. We help individuals and families get relief from debt under the Bankruptcy Code.


The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney with our firm for individual advice regarding your own situation. Cox Law Group encourages you to contact the Firm via e-mail or otherwise. The use of the Internet or voicemail for communications with the Firm will not establish an attorney-client relationship and messages containing confidential or time-sensitive information should not be sent until you and we agree that there is an attorney-client relationship between us. Until such a relationship exists, we will assume that any information you send us is not time-sensitive or confidential.

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