Bankruptcy Myths Week 4
Myth 1: When one spouse files for bankruptcy it will not affect the other’s credit.
Truth: This is not always true. If spouses are co-debtors on one another’s debts, and that particular debt is included in the Bankruptcy, the name of the spouse that is filing for the bankruptcy will drop off that particular asset. This means the un-filing spouse will be completely responsible for that debt that was once shared with their spouse. If the spouse’s are co-debtors on many of the debts that are included in the bankruptcy, the un-filing spouse will end up being wholly responsible for them all.
Myth 2: If I file for chapter 13 Bankruptcy instead of Chapter 7, I can still spend my money the way I want to and on the things I want to.
Truth: In a chapter 13 Bankruptcy, you have a plan payment. This payment is what’s used to pay your creditor’s pro rata, until 3-5 years have passed (based upon how long you are in your Chapter 13). After which time period, whatever is left over is discharged. However, during the time you are in your Chapter 13, any new purchases concerning a vehicle or home must be approved by your Bankruptcy Trustee. Even things such as the private school education of your children may have to be sacrificed because they will not be accounted for in a chapter 13 Bankruptcy disposable income calculation. However, in certain instances, if the child(ren) is special needs, permission may be given for the funding of their eduction.
Myth 3: I will not have to liquidate my savings account, money market, or other accounts while I’m in Bankruptcy.
Truth: As stated in the last article, only a certain amount of cash is exempt in a Chapter 7 Bankruptcy. Your trustee may order that you use some or all of those monies to pay your creditors in order to get your discharge.
If you’re considering bankruptcy, please call Sharnae Smith at Smith Legal Services for your free 20 minute consultation. Please visit www.mysmithlegal.com or give us a call at 240-245-0015 to speak with someone directly.
We'll be teaching a course on Bankruptcy June 18, 2012 7:00pm at the Laurel Armory, please see www.mysmithlegal.com/Course_Offerings.html for more information.