The biggest myth about Chapter 7 bankruptcy is the belief that you will be able to keep your house and car without having to pay for them after you file. I’m shocked that I hear this at least once month. In fact, I spoke with a potential Dallas GA bankruptcy client today who became quite upset after I informed him the truth about this myth.
I suspect that this myth comes from bankruptcy adds in the yellow pages that say “keep all property.” This type of advertising is misleading because you don’t get to keep property that you owe money on unless you keep making the payments directly or through a Chapter 13 plan.
Another myth is the belief that a creditor cannot take your only house or your only car. Again, if you don’t either make the contract payments or pay for it through a Chapter 13, your house and car can be taken.
The truth is that Chapter 7 has zero effect on your future mortgage or car payments. If your mortgage payment or car payment is too expensive for you to afford, chapter 7 is not going to help you. Chapter 7 eliminates unsecured debts like credit cards, medical bills and signature loans. The only way you can wipe out a secured debt in a Chapter 7 bankruptcy, is if you surrender the collateral that secures the debt.
For example, let’s say you have a car that you owe $30,000.00 and the car payment is 600 per month. If you want to eliminate this debt in a Chapter 7, you must be willing to surrender the car back the creditor.
In contrast, if you want to keep this car after you file Chapter 7, you must sign a reaffirmation agreement. A reaffirmation agreement is basically a contract between you and the creditor that says that you will agree to treat this specific debt as if you have never filed bankruptcy. A reaffirmation agreement puts a creditor in a strong position because you can file Chapter 7 only once every 8 years.
If you want to know how the law applies to your situation, call me today for your free consultation.
1. What is Chapter 7 all about?
2. What is Chapter 13 all about?
3. How much does it cost to file?