Knowledgeable El Paso Lawyer Debunks Bankruptcy Myths
Straight answers from an experienced attorney serving debtors in Texas and New Mexico
Every year, hundreds of thousands of Americans mired in debt turn to bankruptcy, often for reasons beyond their control or because of honest, understandable mistakes. Bankruptcy affords a chance to discharge debts and gain a fresh start. At the Law Offices of Cheryl S. Davis, I often encounter debtors who are wary of filing for bankruptcy due to fears of how it will affect their credit and economic future. But their worries are largely based on misconceptions. What follows are some common myths about bankruptcy and the reasons they’re untrue.
Myth 1 —Debt consolidation is a better path than filing for bankruptcy.
The main advantage of bankruptcy is that it allows people to stop collection efforts against them and to get back on their feet financially under the protection of federal law and court supervision. Private debt relief services lack these safeguards. Creditors can still harass you for payment, sue you and foreclose on or repossess your property. Debt consolidation might reduce the interest you pay but the debts remain in force. What’s more, the fees charged for such services can be prohibitive.
Myth 2 —Filing for bankruptcy will ruin your credit and reputation.
Although bankruptcy will temporarily reduce your credit score, getting out of debt can make you more creditworthy in the end. Not solving your debt problem may harm your credit score even more, without the upside. As for your reputation, there is no stigma in filing for bankruptcy. Although bankruptcy court records are public, so many people appear in these records that it’s unlikely anyone will know you filed unless you choose to disclose it or someone is tracking down that information on you.
Myth 3 —Filing for bankruptcy will cause you to lose all your property.
It is true that a Chapter 7 bankruptcy might involve selling property to pay off creditors, but you’ll probably be able to exempt much of your property from liquidation. You probably can keep your home, your vehicle, your pension and many of your personal and household goods. Indeed, many debtors don’t have to give up any of their property. In a Chapter 13 bankruptcy, wage earners can affordably repay part of their debts over time without losing any property.
Myth 4 —Changes in federal law have made it difficult to qualify for discharging debts in bankruptcy.
You may have heard about restrictions on who may file for Chapter 7 protection. It is true that since 2005, debtors filing for Chapter 7 must pass a “means test” designed to determine if they actually have resources to repay their debts. While this disqualifies some debtors, many low income earners can still file for Chapter 7. Those debtors who are ineligible can file for Chapter 13, which requires them to repay only a portion of their debts that aren’t secured by liens.
Myth 5 —Filing for bankruptcy is just filling out forms, which you can do without paying for a lawyer.
As with many government forms, the devil is in the details. Bankruptcy forms are lengthy and their instructions can be confusing. Making a mistake can jeopardize your case and leaving out information can be deemed fraudulent. Also, there’s much more to the process than filling out forms. Effective legal representation can help protect your rights and bring about the best results possible.
Contact an experienced El Paso bankruptcy lawyer for a free initial consultation
The Law Offices of Cheryl S. Davis, P.C. provides clients in Texas and southern New Mexico with thorough advice and effective representation in bankruptcy cases. Please call 915-565-9000 or contact me online to make an appointment at my El Paso or Dallas Metroplex office.