I seem to be hearing about or reading a lot of stories these days where someone decides that the legal advice received from an electrician (or CPA or any other non-lawyer) must be true. I decided to do a quick blog post on some of these misconceptions.
I don’t have to list my mortgage company on the bankruptcy schedules.
The theory behind this was that the person was going to pay their mortgage directly, so the mortgage company did not need to know about the bankruptcy. This is absolutely wrong. Everyone you owe must be listed on your bankruptcy schedules. Mortgages are listed as a secured debt and you will have the opportunity to indicate what you intend on doing with the property (either continue making payments, surrender the property, or other options available in a Chapter 13). Intentionally leaving out assets or debts on your bankruptcy petition is fraud and punishable by fine, imprisonment, or both. See also the recent story about Lenny Dykstra and his indictment for bankruptcy fraud.
I can’t file bankruptcy unless I am totally broke.
Another misconception I heard this week was that you have to be flat broke to file for bankruptcy. This is not completely true. In CA, there are fairly generous exemptions that apply to you when you file for bankruptcy. These exemptions allow to retain necessary items and also allow some flexible options for maintaining savings and vehicles. Part of the bankruptcy planning process is to make sure you understand what you can and cannot keep, but you do not need to wait until you have only pennies left to obtain a fresh start.
I know I can’t get rid of taxes.
This one is a fairly big misconception. There are a lot of rules that determine whether a tax is dischargeable or not, but it is not accurate to say that all taxes are nondischargeable. Personal income taxes that are more than 3 years old are taxes that should be analyzed by a bankruptcy attorney to see if they can be discharged in your bankruptcy.
Filing for Chapter 7 means that the court will come to my house and sell everything I own.
This is similar to the one above about being totally broke, but I hear this a lot from people not familiar with bankruptcy. People often ask me if they can keep their beds or if the court is going to sell the household items to pay creditors. The short answer to that is…no, the judge or trustee is not going to show up at your house to sell your bed. You are allowed to keep items necessary for you and your family’s welfare. Again, talking and planning with a bankruptcy attorney will help you keep as many of your assets as legally possible and will also help alleviate some of your concerns in filing for bankruptcy.
Please feel free to contact me at 925-586-6738 or [email protected] if you would like to discuss your situation and the options available to you.
This is just a basic overview and is not legal advice specific to your situation. If you are considering bankruptcy or are feeling overwhelmed by debt, you should speak with an attorney in your area for legal advice. To speak with me regarding your situation, please email me at [email protected] or call 925-586-6738.