John E. Pytte
If you are considering bankruptcy as an option to eliminate your debt, you are making one of the most important decisions of your life. Choices you made before might have put you in financial trouble, but choices you make now and in the future can get you out of it. The best decisions are informed by the facts.
A University of Illinois study found that there is, indeed, life after bankruptcy. The study found that because those who file for bankruptcy are required to participate in debt counseling before and after filing for bankruptcy, they make more informed and wiser financial choices going forward.
At Pytte Law, I have helped hundreds of clients in Savannah, Hinesville, Statesboro, Richmond Hill, and Ludowici, Georgia, as well as the counties of Chatham, Liberty, Bryan, Effingham, and Long by dispelling common myths about bankruptcy so they can make informed choices about their financial futures.
There are many common misconceptions about bankruptcy, but here a few addressed in detail.
Bankruptcy permanently ruins your credit.
While it is true that bankruptcy has a negative effect on your credit score, if you are considering bankruptcy, your credit score likely is not good anyway. Bankruptcy does not remain on your credit report forever. Chapter 7 bankruptcy, which discharges all debt, remains on your credit report for 10 years. Chapter 13 bankruptcy, which restructures your debt to create a payment plan, remains on your credit report for up to seven years if you complete the restructured payments.
You won’t be able to buy a car or property after bankruptcy.
This is false. You can buy a car or a home after bankruptcy. When and where depends on the type of bankruptcy you filed and the type of loan you’re seeking.
You must wait four years from the time the court discharges your debt in Chapter 7 bankruptcy before you can get a conventional loan. You may be able to qualify within three years for a USDA loan or just two years for a VA or FHA loan.
You must wait for four years after the court dismisses the bankruptcy in a Chapter 13 filing before you can obtain a conventional loan or one year before applying for a USDA loan. There is no waiting for an FHA or VA loan once the court dismisses your Chapter 13 bankruptcy.
You lose all your possessions in bankruptcy.
Possessions are categorized as “exempt” and “non-exempt” in bankruptcy. Exempt property will be any items necessary for living and working and may be protected in bankruptcy. There are federal exemptions and state exemptions. There are maximum exemption amounts on your home, auto, wages, pensions, insurance, annuities, workers’ compensation and personal injury settlements, and certain personal items.
In Chapter 13 bankruptcy, you keep all your possessions, but you must pay creditors the value of the nonexempt property or your disposable income, whichever is greater, in your repayment plan. In Chapter 7 bankruptcy, your nonexempt property will be sold, and the proceeds distributed among your creditors.
Bankruptcy discharges all debt.
Chapter 7 Bankruptcy will discharge unsecured debt, including but not limited to credit cards, personal loans, and medical bills. It can also discharge balances due on your auto loans and mortgage, although you will have to surrender your vehicles and real property to do so. Chapter 7 will not relieve debt from obligations such as alimony and child support, student loans, back taxes, court fees and penalties, homeowner association fees, and judgments against you for certain personal injury claims. It also won’t take care of any unsecured debt you didn’t have discharged in your bankruptcy case.
Chapter 13 bankruptcy provides an opportunity to keep the property you own in exchange for agreeing to pay back creditors over a three- to five-year period. Chapter 13 bankruptcy will not discharge debts such as child support, alimony, and taxes. You will need to keep current with those payments throughout the life of the bankruptcy, but Chapter 13 might help you catch up with payments in arrears.
Seek Help from an Experienced
Bankruptcy is complicated, especially if you have no experience with the process. Your choice of a bankruptcy attorney is as important as choosing whether to file for bankruptcy or not. Your attorney’s first task is to provide the facts about bankruptcy and help you make an informed decision about which type of bankruptcy to file or if you should file at all.
Avoid the common misconceptions about bankruptcy and get the facts from a knowledgeable and experienced bankruptcy attorney. At Pytte Law, I have been setting the record straight for clients in Savannah and Hinesville, Georgia, and surrounding counties for more than 25 years.
Get the facts. Call me at Pytte Law today.