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Top 5 Bankruptcy Myths Debunked

Bankruptcy has many misconceived stigmas to it. Frankly, there is a lot of misinformation out there, and much of the stereotypes regarding Bankruptcy are just not true. With just over One Million people declaring Bankruptcy as of the 12 month period ending on September 30, 2013, you are not alone in this process.[i] With Bankruptcy folklore continuing to emerge, our Chicago bankruptcy attorneys want to debunk some of these popular myths for your sake. Bankruptcy does not have to be a scary process, and we hope that this article helps clear some of the misconceptions you might have read or heard. 1. You Must Be Broke Before Filing Bankruptcy A very common misconception. You should not wait until an emergency with bank restraints or until your home is getting foreclosed on to file Bankruptcy. A good rule of measure is to look where you will be financially six months from now. If for worse, then Bankruptcy might be worth looking into. 2. Bankruptcy Will Discharge All Debts NO! There are certain debt obligations that are nearly impossible to discharge. A great example is domestic support obligations (i.e., Child Support and Alimony). Also, as a result of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, student loans fall in a similar category as domestic support obligations. Student loans can be forgiven if you are able to prove hardship, such as a permanent disability, but even that standard is nearly impossible to meet. 3. If I File Bankruptcy, I Will Lose Everything I Own If you file Chapter 13, you actually get to hang on to all your assets as long as you remain current in your payment plan. If you file Chapter 7, most exemptions provided in the State you file will let you keep your valuable assets. Our distinguished attorneys at the Law Office of William J. Factor are more than happy to discuss how your valuable assets can be protected in Bankruptcy. 4. Only Financially Irresponsible Individuals File Bankruptcy Definitely not true! Did you know Donald Trump filed Bankruptcy? Heck, even Mark Twain, one of America’s greatest authors, filed Bankruptcy. Unexpected-life changes always happen such as job loss, divorce, serious illnesses, etc. The Bankruptcy code was enacted to protect the “unfortunate but honest debtor,” with the idea of giving a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt. Bankruptcy is meant to give you the fresh start you need! 5. I Can Only File Bankruptcy Once In My Lifetime This popular myth is also not true. If you have received a discharge in a previous Bankruptcy proceeding, that does not preclude you from filing again in the future. If you received your first discharge under a Chapter 7 Bankruptcy, you cannot receive a second discharge in any Chapter 7 case within eight years from the date that the first Bankruptcy was filed. If you received your first discharge under Chapter 13, you cannot receive a second discharge in any Chapter 13 case that is filed within two years form the date that the first Bankruptcy was filed. Schedule a Free Consultation at (312) 878-6976 to Speak with a Chicago Bankruptcy Attorney There are many more common misconceptions out there. Before you decide to take the leap into Bankruptcy, consult one of our distinguished Chicagoland bankruptcy attorneys at the Law Office of William J. Factor, and learn the facts about how Bankruptcy will affect you. At the Law Office of William J. Factor we pride ourselves in having the “Big Firm Expertise at Reasonable Rates.” Don’t hesitate, pick up the phone and call us at (312) 878-6976 for your free, no obligation consultation!! [i] http://www.uscourts.gov/uscourts/Statistics/BankruptcyStatistics/BankruptcyFilings/2013/0913_f2.pdf Read More
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Full Disclosure: Why It's Important to Tell Your Chicago Bankruptcy Attorney EVERYTHING When Filing Bankruptcy

The decision to file bankruptcy is a difficult one for most people, and it requires disclosure of a tremendous amount of information. The temptation can be great to hold back in some areas, just to feel like one is retaining a little bit of control. Perhaps there’s some jewelry that was just received as a gift, or an inheritance that is expected soon. Will what your lawyer doesn’t know hurt him? Maybe not–but it will very likely hurt you. Whether you are filing Chapter 7 or Chapter 13 bankruptcy, failure to accurately disclose every detail of your financial situation can come back to haunt you in a number of very serious ways. Just because you don’t tell doesn’t mean they can’t find out You may think that holding something back from your attorney means that the information is a secret. The reality is that bankruptcy trustees are skilled in looking for hidden assets, and technology has made it easier than ever. Many trustees and their staff regularly make use of social media to discover information that might not have made it onto the bankruptcy schedules. Even if you think your social media accounts are locked up tight, they’re probably not as private as you think. And you have no control over what other people’s privacy settings, and what they share about you. If you’re in a Chapter 7 case, and your best friend tags you in a picture with your new X-Box or iPad you “forgot” to disclose, there could be trouble. If you’re in a Chapter 13, and a friend congratulates you on that new freelance gig you neglected to mention to your lawyer or the trustee, you are going to have some explaining to do. Tell the truth–or face the consequences If you fail to disclose assets, at the very least, you may be denied a discharge of certain debts. At worst, you could face jail time. Here are some of the possible consequences for failure to disclose information in a bankruptcy case: Your discharge will be denied, meaning that whatever debts you hoped to erase by filing bankruptcy will have to be paid in full. Even if you file a subsequent bankruptcy, you will not be able to discharge debt identified in a previous case where you failed to disclose assets. Your bankruptcy case may not be dismissed, meaning that even though your discharge is denied, the trustee can still collect and liquidate your assets to pay your creditors. If you’ve already received a discharge, it can be revoked. A bankruptcy discharge does not close the bankruptcy case. A discharge that has been granted can be revoked up until the case is closed, and in some cases, even after the case is closed. You could go to jail–for years. When you sign your bankruptcy schedules, it’s just like testifying to information in court: you are under oath. Misrepresenting or failing to disclose could lead to a perjury conviction, subjecting you to up to five years’ imprisonment and up to hundreds of thousands of dollars in fines. There is nothing to be gained by holding information back from your attorney. Don’t think of your lawyer as one more person trying to catch you with your hand in the cookie jar. Instead, realize that he’s trying to help you keep as many “cookies” as he legally can, so you can enjoy them without forever having to look over your shoulder. Schedule a Consultation with Our Chicago or Northbrook Bankruptcy Attorneys If you’re contemplating filing bankruptcy, contact our office today to learn how we can help you to protect as many assets as possible. Read More
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What NOT to Do Before Filing Bankruptcy

Most people who file a Chapter 7 or Chapter 13 bankruptcy have done everything they could to avoid filing, or even consulting with a bankruptcy attorney. People take pride in being to solve their own financial problems. Unfortunately, sometimes their honest attempts to do what they think is best end up jeopardizing their chance for a financial fresh start. Here are some things that you should NOT do if bankruptcy is a possibility in your near future–even if they initially seem like a good idea. Don’t spend down your retirement accounts. When there are piles of bills to be paid, the temptation to borrow from your 401(k) or other retirement accounts in an attempt to stave off bankruptcy is great. After all, it’s your money, it’s just sitting there, and you need it now. Why you shouldn’t do it: Borrowing from, or completely liquidating, your retirement accounts may not be enough to prevent an eventual bankruptcy. If you leave those funds where they are, they will very likely be exempt in a bankruptcy–meaning that when your debt is gone, you’ll still have your retirement funds. Also, if you do take money from retirement accounts, there may be stiff penalties and taxes that cannot be discharged in bankruptcy. Last but not least, those funds won’t be available when you really need them. Don’t sell or give away property to friends or family. Another temptation when the possibility of bankruptcy looms is to raise funds by selling your property, or to protect it by giving it to a family member for safekeeping. You get some much-needed cash, and your brother gets your motorcycle for a great price. It seems like a win-win. Why you shouldn’t do it: Bankruptcy trustees are highly suspicious of transfers of property to friends or family, especially if fair market value was not received for the items. The trustee might undo the transfer. Worse, you may be found to have intentionally committed fraud and have your bankruptcy discharge denied. Worst of all, criminal charges for fraud might be brought against you. Don’t repay family or friends money you owe them. You don’t have much cash on hand, and bankruptcy seems like a likely option. Shouldn’t you use what little you have to repay your mother for those few months’ rent she gave you the money for? It seems like the honorable thing to do. Why you shouldn’t do it: If you’re looking at a bankruptcy, your mom isn’t the only one to whom you owe money. The bankruptcy courts don’t permit debtors to give one creditor preferential treatment over others. The trustee has the right to reclaim preferential payments and redistribute them. Don’t run up your credit card bills. You know you shouldn’t, but you also know that once you file bankruptcy, you’re not going to be able to use your cards, and there are some things you really want. The credit card debt is going to be discharged in bankruptcy anyway; you’re just adding a little more. Is it really such a problem to do a little extra spending before you give up your cards? Why you shouldn’t do it: People who ran up credit card debt, then tried to have it discharged in bankruptcy, inspired some 2005 changes to the Bankruptcy Code. These changes, aimed at preventing such abuses, lowered the threshold for “luxury” purchases, and extended the period prior to the bankruptcy filing in which purchases are most carefully scrutinized. If the trustee finds that you ran up debt you didn’t intend to repay, he or she may not allow that debt to be discharged, and you’ll be on the hook for it. There are more “don’ts,” and many “dos,” to observe when considering bankruptcy. Don’t decide on your own. Call our Chicago bankruptcy firm for a consultation. Read More
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