Top 5 Things a Bankruptcy Lawyer Wishes You Knew
Bankruptcy is one of the most misunderstood legal processes. Although it can give struggling consumers and business owners a fresh financial start and even help you keep your car and your home, people visit a bankruptcy lawyer with the same attitude that they visit their dentist: they are facing a necessary evil.
At Maxwell Dunn PLC, we meet with many people who have misconceptions about the bankruptcy process, some of which have impacted their ability to file. In this blog, we’ll list the top 5 things that a bankruptcy lawyer wishes you knew, so you avoid making some expensive mistakes.
1. DIY bankruptcy is not a good idea
While it’s true that you don’t legally need an attorney to file for bankruptcy, the U.S. Bankruptcy Code imposes complex requirements on filers and making mistakes on the paperwork can invalidate your case. You may also not understand factors like the means test (for Chapter 7 filers) and state vs. federal exemptions. A Michigan bankruptcy attorney will ensure that you understand your options and all paperwork is completed and filed accurately.
2. Transferring assets won’t protect them
Many people transfer assets like cars or homes to a friend or family member before filing bankruptcy. Their goal is to protect the asset from being seized and liquidated to pay creditors, but transferring it can complicate their case.
If the transfer was recent and you ‘sell’ the property for less than fair market value, your trustee could view the transaction as one that was meant to deceive or conceal property and file a lawsuit to undo it. In addition, if that asset was one that could have been exempted, you lose your right to claim that exemption because you attempted to hide it via fraud.
3. Some debts are nondischargeable
Bankruptcy doesn’t get rid of all debt. Some obligations, such as student loans, child support, and most federal, state, and local taxes, are nondischargeable, meaning that you remain responsible for them even after your bankruptcy case concludes.
This doesn’t mean that bankruptcy can’t help you manage them. With Chapter 7, your unsecured debts, like credit cards and medical bills, are discharged, leaving you with more money to pay off debts like student loans or overdue taxes. With Chapter 13, you can reorganize all of debts and pay off any arrears through a three to five-year repayment plan.
4. You will get credit again
One of the biggest reasons why people fight to avoid bankruptcy is fear of permanent damage to their credit. They assume that they will never be able to buy a home or qualify for any other type of credit, which isn’t true.
Bankruptcy does remain on your credit report for up to 10 years, but you can usually get a loan not long after discharge. The catch is that you may be charged a higher interest rate. As time passes and you pay your bills as they come due, you will rebuild your credit and eventually qualify for lower interest rates.
5. Bankruptcy is not a sign of failure
Financial challenges can happen to anyone, even those who have always been careful with their money. For example, the COVID-19 pandemic has put an estimated 18 million Americans out of work, and a devastating illness can leave you too disabled to maintain full-time employment. Don’t let shame prevent you from discharging debts you can no longer afford and starting over.
Contact the Bankruptcy Attorney Team at Maxwell Dunn PLC
Filing bankruptcy is one of the most important decisions you can make for your financial future, so don’t leave it to chance. At Maxwell Dunn PLC, we give you peace of mind by ensuring that all legal requirements are met and helping you plan your bankruptcy to protect as many of your assets as possible. For more information or to schedule a consultation, contact us today.