Lombard, IL Bankruptcy Attorneys

Common Myths about Bankruptcy in Illinois

There are numerous myths and misconceptions people have about filing for bankruptcy. Unfortunately, these rumors and half-truths dissuade many individuals from exercising their right to obtain much-needed debt relief through this process. At Mevorah & Giglio Law Offices, we have helped clients in Chicago and throughout Northern Illinois, who are going through financial difficulties for over two decades. Our award-winning lawyers have extensive experience with all types of bankruptcy cases; including Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, small business bankruptcy, and non-bankruptcy solutions. We address some of the most common bankruptcy myths so that you can gain a better understanding of the process and whether bankruptcy is the right solution for you.

Bankruptcy Myth #1: Stricter laws mean I am ineligible to file for bankruptcy.

While the Bankruptcy Abuse and Prevention Act (BAPCPA) introduced a means test and additional requirements to file (such as credit counseling), most people who would have qualified to file Chapter 7 before BAPCPA are still eligible. If your income is above the Illinois median income for a household of your size, you will need to show proof that you have insufficient funds to pay your creditors (after deducting all allowable living expenses). If you still are unable to qualify for Chapter 7, Chapter 13 Bankruptcy may be a good solution to consolidate your debts, reduce interest charges and make one lower and more manageable monthly payment.

Bankruptcy Myth #2: If I file for bankruptcy, I will lose all my personal property.

Under Chapter 7 Bankruptcy, you are allowed to exempt a certain amount of personal property from liquidation. This includes up to $15,000 in equity in your homestead, up to $2400 in equity in vehicles, professional items and tools of your trade up to $1500, household furnishings, clothing, books, pictures, Bibles, health aids and most retirement and pension plans. If you file jointly with your spouse, you receive a double exemption on the aforementioned items. In addition, when bankruptcy is filed, an automatic stay goes into effect, immediately halting private creditor activity. In many cases, this can prevent (or at the very least delay) a home foreclosure and give you an opportunity to work out an arrangement to keep your home.

Bankruptcy Myth #3: I will not be able to get credit again for ten years after I file.

While a bankruptcy filing will stay on your credit report for seven to ten years, most individuals begin to receive credit offers again shortly after the bankruptcy is discharged. Bankruptcy definitely has an adverse impact on your credit score, but if you have mounting debts and several late payments, your credit score is most likely the least of your worries. Discharging those debts can give you a chance to recover financially and begin to rebuild your credit over time.

Bankruptcy Myth #4: If I file for bankruptcy, everyone will know about it.

Bankruptcy is a matter of public record and your name is entered into the bankruptcy court record system. However, unless you are a public official, it is highly unlikely anyone you know will go looking through those records to see if your name is there. At the very worst, you may receive some letters from area car dealers reassuring you that you can still qualify for an auto loan even after going bankrupt.

Bankruptcy Myth #5: If I am married, I must file jointly with my spouse.

There is no requirement to file for bankruptcy jointly. In some cases, it might make sense to do so. For example, if you are facing bankruptcy and divorce at the same time, you may want to file jointly in order to discharge the debts you hold together and simplify the divorce process. On the other hand, if all or the vast majority of the debts are in your name only, it might make more sense to file individually.

Bankruptcy Myth #6: I can only file for bankruptcy once.

Not true. However, there are time limitations between discharges. For Chapter 7, you can only receive one discharge every eight years. For Chapter 13, you can only receive one discharge every two years.

Bankruptcy Myth #7: Filing for bankruptcy makes me an irresponsible person

Many people decide not to file for bankruptcy because they believe it makes them irresponsible. The fact is, filing for bankruptcy is your right under federal law. Many good people experience hard economic times because of recessions, job loss, unexpected medical expenses, etc. Bankruptcy is often the best solution to regain their financial footing. Bankruptcy has also been used by numerous corporations to stay afloat; examples include the Chicago Cubs, Six Flags Entertainment, American Airlines and countless others. In fact, well-known New York real estate mogul Donald Trump has filed corporate bankruptcy four times. Whether or not you believe bankruptcy is morally right is a personal matter. Just understand that it is your right, and it has been used by even some the most successful individuals and entities when they have fallen on hard times.

Filing for bankruptcy is a major decision and should not be undertaken lightly. However, sometimes it is the best way to recover from extreme financial difficulties. At Mevorah & Giglio Law Offices, we understand that every situation is unique, and we take the time to examine your specific circumstances thoroughly and determine the best path forward to financial recovery. For a free consultation with one of our experienced DuPage County bankruptcy attorneys, contact our office today at 630-932-9100630-932-9100.