From Chapter 7, Liquidation, to Chapter 11 for Businesses, to Chapter 13, Repayment Plans, and Subchapter V, Debt Consolidations, Attorney James Bernicky of the Bernicky Law Firm fields many questions from people wondering: what does it all mean?
In this winter edition of 630 Napervilles Legally Speaking, Bernicky discusses the importance of knowing your options and talking to a professional about your situation and your options.
He acknowledges that conversations about financial issues are difficult but necessary to find solutions. Debt issues and bankruptcy have an unpleasant connotation with many people, which leads to a dearth of misinformation and myths.
If you, a client, or someone you know has questions, they should seek answers from an experienced and reputable professional as soon as possible.
Here are some common myths about Bankruptcy:
I can’t file for bankruptcy because everyone will know I filed for bankruptcy.
Bernicky says this is typically not the case. While Bankruptcy filings are technically public record, there is no publication of them, and they have not been found on Google. Filings will show up on credit reports, and your creditors will be notified, but by and large, your neighbors, friends, and family will not know. Over the last 15 years, Illinois has averaged nearly 50-thousand individual filings a year (34-thousand average over the past 5 years), so it’s very possible someone you know has filed without you being aware of it.
I can’t file bankruptcy because I make too much money to file bankruptcy/I’ll lose my house, retirement, everything.
Filing Bankruptcy is a financial decision that can be based strictly on numbers. While having equity in a home or a higher income may result in filing a Chapter 13 vs a Chapter 7, they are not typically bars to filing for bankruptcy protection. There are exemptions for equity portions in homes, cars, etc., and full exemptions for most retirement accounts.
I can’t file for bankruptcy because I’m current on my bills, and I’m not being sued or in collections.
Filing for Bankruptcy Protection can occur when you are current or behind on bills, in collections, or when a judgment or garnishment has already happened. There is no *right* time, but talking with an attorney sooner rather than later can save money, stress, and time!
I can’t file for bankruptcy because all my debt is from my business, my ex, student debt, or tax debt.
Tax Debt, debt incurred in starting/running a business, and debt co-signed with another party (though if they are not filing, their obligation would remain) can be dischargeable.
Student loan bankruptcy has recently changed, and there is now a mechanism during a bankruptcy to eliminate this debt. Every situation is different, which is why it’s so important to talk to an attorney about your options.
I can’t file for bankruptcy because It will ruin my credit, and I’ll never be able to recover financially and buy a house or car.
Most people filing for bankruptcy see their credit score rise ABOVE, where it was before filing within a couple of years. Car loans and new credit cards can be opened after filing, and homes can be purchased in 2 years if qualifications are met.
I can’t file for bankruptcy because a debt consolidation plan is better.
Bernicky says a debt consolidation plan may be better, but not often, in his experience. Consolidation plans pool your money into an account while someone attempts to negotiate with a creditor to take less than they are owed. However, these companies will not appear in court for you, and if this consolidation is unsuccessful, they have no option B or C.
I can’t file for bankruptcy because I don’t know if I need Chapter 11, 7, or 13!
Calculations of your income, assets, and liabilities, as well as your county of residence, type and age of debt, and number of dependents, are essential to determine if you qualify for a particular chapter. These factors are why it’s so important to talk to a professional who knows the ins and outs of the law and can assist you in determining your options.
For more information, visit Bernicky Law Firm.