Major Bankruptcy Myths

I make too much money to file.

There is no income cap to qualify to file a Chapter 13 bankruptcy.  There is an income cap for a Chapter 7 bankruptcy.  To qualify for a Chapter 7 bankruptcy, you must make less than the median income for a household of your size in the State of Florida, whether before taxes or after performing what is called a “Means Test.”  If you do not qualify for a Chapter 7 based on your income, you

 

Bankruptcy will ruin my credit forever.

A bankruptcy filing may remain on your credit report for up to seven to ten years.  It depends on the specific credit reporting agency.  You can obtain a free copy of your credit report each year. The bankruptcy process is designed to give you a fresh start, enabling you to rebuild your credit over time.

 

I will lose all my property if I file.

While a Chapter 7 bankruptcy is commonly known as a “liquidation” form of bankruptcy, you will not necessarily lose all of your property.  Florida enables you to protect a certain amount of property from liquidation, and the property that’s not protected is subject to being liquidated.  However, it is often possible to negotiate with the Interim Trustee to retain all of your property.  If you are concerned about losing your property, you may consider a Chapter 13 bankruptcy, which is a re-structuring of the debt – property is not subject to liquidation.

 

I can’t keep my house if I file.

If you file a Chapter 7 bankruptcy and you are current on your mortgage, you can keep making the normal payment to the bank and keep your house.  If you are behind on your mortgage and want to stay in your home, a Chapter 13 bankruptcy will enable to you catch up on the overdue payments and begin making your normal mortgage payment again.  Upon successful completion of the Chapter 13 Plan, you will be current on your mortgage.

 

I will lose my retirement savings.

Florida offers special protection for qualified retirement accounts in bankruptcy filings.  Qualified retirement accounts such as IRAs, 401(k)s, and 403(b)s are completely exempt from attachment in a bankruptcy proceeding.  This means that you cannot be required to contribute any of the money in the accounts to repay your unsecured creditors, such as credit cards or medical debt.