Bankruptcy Common Myths and Questions
The following are just some of the basic misconceptions concerning bankruptcy.
1. Won’t I lose all my property if I file?
Generally, the answer is no. Typically, you won’t lose anything unless you decide to surrender property back to the creditor or trustee. It is true that when you file, your property (land and personal belongings) also become property of the “bankruptcy estate” and the trustee. The trustee’s main job is to see if you have any major assets that can be quickly sold off for cash to repay creditors. In a typical case, the debtor usually does not have many, if any, valuable assets with equity that could be sold off to repay creditors.
2. Won’t I lose my car and/or home?
Generally, you won’t lose either because you can reaffirm (continue with the car/mortgage payment) or redeem the property (meaning purchasing it back from the trustee at a set price).
3. My house is in foreclosure, how can I save the house?
Filing bankruptcy “stays” or stops most legal proceedings against you and/or your property, including foreclosure of your home or repossession of your vehicle. If you file under Chapter 13, you get the chance to make up any mortgage arrearage or missed car payments over time.
4. Do I have to list all my debts?
Yes. You cannot deliberately leave out certain debts, although any debt that is not listed will not be discharged or erased. The most common debt people try to leave out is a debt to a family member or friend. It is extremely important that you identify all debts to the best of your ability.
5. We’re thinking about a divorce and we have a lot of debt, when should we file?
The best time is to file bankruptcy is before you file for divorce. If you file for divorce then file for bankruptcy, the bankruptcy filing will stop the divorce until the bankruptcy is completed. It is also cheaper for a “couple” to file while they are still together rather than separated or divorced. However, there are situations when it would be advantageous for one spouse to file bankruptcy before or even during a divorce.
6. I can discharge my student loans, can’t I?
If your student loan is from a private source, then it can be discharged. However, in most cases, the student aid is tied to government funding to some degree, which makes most student loans not dischargeable. In rare situations, a debtor may be able to discharge a government funded student loan if the debtor can demonstrate he/she has suffered some debilitating injury and is unable to work.
7. How long will the bankruptcy remain on my credit report?
The bankruptcy will be listed on your credit report for 10 years from the date of your discharge order. However, if you are in a Chapter 13, expect the bankruptcy to be listed between 13-15 years, since the Chapter 13 plan runs 3-5 years and your report will show current bankruptcy status.
8. If I lost my license to the BMV, can I get my license back by filing bankruptcy?
In general, YES. If you lost your license due to uninsured auto accident and/or have a large reinstatement fee to pay in order to get your license back, you may want to consider bankruptcy as the uninsured accident and reinstatement fees are discharged in bankruptcy. Typically, within a week of filing, you can get your license back (need to go to the Columbus or Cincinnati main BMV office with your Notice of Filing Bankruptcy paperwork). However, you would first need to remove all warrant blocks (typically you forgot to pay court cost/fines for a traffic case and so the municipal court issues a warrant block on your license to get your attention), and make sure you have insurance or an SR-22 bond on file with the BMV. The only things a bankruptcy can’t help you with here would be any OVI related injury claims or if you are under a 12-point suspension (as you have to serve out the suspension, but at least you could get rid of the reinstatement fees).