Bankruptcy Myths

Real Answers to Bankruptcy Myths

If you are considering a bankruptcy in Kansas, you may have been given mis-information about how a bankruptcy actually works. Below are a few common myths around filing a bankruptcy:

After I File a Bankruptcy, I Will Still Be Harassed By My Creditors.

This is absolutely false. Bankruptcy law provides for an automatic stay. Simply, as soon as you file for bankruptcy a hold is put on all your outstanding debts and any creditor attempts to collect those debts. The law prohibits a debtor to attempt to collect, possess, or even contact the debtor in regard to the debt. If a creditor does not follow the rules, the debtor may have an action in the form of punitive damages. Whether a debtor has a cause of action against a creditor should be left to your bankruptcy attorney to answer.

My Creditors Will Initiate the Bankruptcy Process.

This is also false. There are two ways a debtor can file for bankruptcy voluntary and involuntary. Voluntary filing is done by the debtor. The debtor talks to an attorney or files a petition pro se and gets the bankruptcy process started. In an involuntary bankruptcy, the creditor forces the debtor into bankruptcy often times unwanted by the debtor. Voluntarily filing for bankruptcy gives the debtor a chance to set his terms and allows the debtor a free choice for the bankruptcy.

If I File For Bankruptcy, I Will Lose My Property and All Other Assets To Creditors.

Again this is false. While it is one of the duties of a trustee to sell assets in the estate, the trustee cannot necessarily reach all of your assets. There are many factors that must be examined before this happens. The type of bankruptcy has a lot to do with how much the trustee can seize. For example, a chapter 13 bankruptcy is a reorganization bankruptcy. Simply, the debtor keeps the majority if not all of his assets, and forms a repayment plan to satisfy interested creditors. Even in a chapter 7 bankruptcy filing the debtor gets to keep many assets.

Filing a Bankruptcy Is a One-time Event.

This is also false. The bankruptcy code does allow a debtor to file for bankruptcy more than once. Depending on which bankruptcy you choose, there are time limits on when you can file again.

Filing a Bankruptcy Will Prohibit Me From Establishing Credit Again.

This is false. You can rebuild your credit again after a Kansas bankruptcy. Banks offer credit on a secured basis to poor credit customers. The debtor would add a small amount of money to a secure card and make purchases from the money added to the card. Once the debtor proves his ability to pay, credit limits will increase incrementally. As little as two years after a chapter 7 bankruptcy, a debtor is eligible for mortgage loans on terms equal to someone who has not gone through bankruptcy. Creditors look more to a debtor’s stability, as opposed to the fact you filed for bankruptcy.

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