People end up in debt for many different reasons. Sometimes losing a job leaves a person with no option other than to put personal expenses on a credit card. Other times, a medical emergency leaves a family with enormous medical bills. These situations are unfortunately common, and they are rarely the debtor’s fault.
Bankruptcy can be a good solution for debtors who find themselves unable to pay back what they owe. However, as common as bankruptcy is, there are still several popular misconceptions about this legal process. Here are four common ones.
1. You Cannot File Bankruptcy Separately From Your Spouse
People often assume that if they are married, they must file bankruptcy together as a unit, but this is not the case. In all 50 states, you can file bankruptcy separately from your spouse. Doing so can be a way to protect your spouse’s credit score while your own takes the hit from bankruptcy.
Should you file bankruptcy separately from your spouse? That is a whole other question.
If you and your spouse have shared debts and you file bankruptcy to discharge those debts, your spouse’s credit score will still be affected. Creditors may also try to collect from your spouse when they receive notice that you’ve filed for bankruptcy. On the other hand, if all the debts to be discharged are in your name only, you should be able to file bankruptcy against them without harming your spouse’s credit.
2. You Have to Give Up Your Assets to File Bankruptcy
Some people avoid filing for bankruptcy because they are afraid creditors will seize their house, car, or other valued possessions. In reality, though, there are strict regulations as to what assets creditors can seize. In most cases, your home, vehicle, and basic household goods are exempt from seizure.
You may have to give up luxury and recreational vehicles or extra televisions and electronics, but the courts and your creditors will not seize anything you truly need. In most Chapter 7 bankruptcies, debtors do not give up any assets.
3. You Can Only File Bankruptcy Once in Your Life
If you have declared bankruptcy before, you may have heard you can’t do it again. This is simply untrue. There is no law that dictates how many times a person may file for bankruptcy throughout their life. Certain laws, however, regulate how often a person can discharge their debts.
You can only discharge through Chapter 7 or 11 bankruptcy every eight years. If you file Chapter 12 or 13 bankruptcy, you cannot file a Chapter 7 case until six years have passed. You also cannot file a Chapter 13 case unless four years have passed since you last filed Chapter 7, 11, or 12 – or unless two years have passed since you last filed Chapter 13.
Let your attorney know when you last filed bankruptcy and what chapter you filed under. They can tell you what your options are if you need to file again.
4. You Should Put Off Filing Bankruptcy for as Long as Possible
Bankruptcy has long had negative stigma associated with it, and as such, many people put off filing bankruptcy until they have absolutely no other option. As a result, these people spend years on the edge and dealing with the emotional trauma of living in deep debt.
While you should not take the act of filing bankruptcy lightly, you should meet with an attorney and discuss it as an option as soon as you realize you’re burdened by excessive debt. You may or may not decide that you need to file right away, but at least you won’t have to face the regret of wishing you’d explored bankruptcy as an option much sooner.
Hopefully this article has cleared up a few common misconceptions about bankruptcy. It can be a smart, effective way to move forward when you are burdened by excessive debt. If you’re considering bankruptcy, contact The Madden Law Firm Attorneys at Law to discuss your case and learn more about your options.