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Bankruptcy Myths

Bankruptcy Myths in Madisonville

Serving Hopkins County in Kentucky

Most people know very little about bankruptcy. The institution has become unfairly stigmatized, resulting in many shying away from a process that can extend them tremendous debt relief in their most vulnerable moments.

At The Law Offices of Mark Little, I strive to clear up these misconceptions and help my clients understand the powerful benefits of filing for bankruptcy. I have 40 years of experience as a bankruptcy attorney and have handled many thousands of cases. I can determine what type of bankruptcy will best suit your needs and leverage my knowledge and resources to help you make the most of your filing.

If you have questions or concerns about filing for bankruptcy, do not hesitate to request a free initial consultation by contacting me online or calling (888) 392-0409.

Myth: Everyone Will Know I Filed for Bankruptcy

It can be difficult to talk about debt, and it is fair that you may not want others to know that you are financially struggling. A common fear is that everyone will somehow become aware that you have filed for bankruptcy.

While it is true that bankruptcy is technically a matter of public record, the reality is that it is highly unlikely that anyone will take the time and trouble to research your filing. Not only would they need your social security number to do so, but they would also need to know to investigate your financial affairs in the first place.

Many counties do not publish bankruptcy filing information in their local newspapers. Hopkins and Webster Counties are among those that do not publish this information. I can help you understand what public exposure may result from your filing.

Myth: Filing for Bankruptcy Means that I Have Failed

This is simply not true. Financial hardship often results from factors completely outside your control. An unanticipated illness, injury, natural disaster, or loss of income can all contribute to a situation where you cannot keep up with your bills, even if you were doing everything “right.” These factors have no bearing on your moral character, and you should not feel embarrassed to ask for help.

Bankruptcy is a tool designed to help people in financial distress secure relief and overcome debt. By filing for bankruptcy, you are not admitting defeat: You are taking the first step toward a more sustainable financial future.

Myth: I Can Only File for Bankruptcy Once

This is not true. You can file for bankruptcy more than once after a certain amount of time has passed. However, you should be extremely cautious when exploring whether to file bankruptcy again. Bankruptcy can do tremendous damage to your credit, and while many can efficiently repair their credit scores, filing again can undo hard-won progress.

Still, sometimes financial hardship is out of your control. You may find yourself in a situation several years down the line where filing for bankruptcy a second or even third time is the only means by which you will be able to effectively manage your debt.

If you originally filed for Chapter 13 bankruptcy, you must wait at least 2 years before filing for Chapter 13 again or at least 4 years before filing for Chapter 7. If you previously filed for Chapter 7 bankruptcy, you cannot file for Chapter 7 again until at least 8 years have passed.

Myth: I Will Lose Everything If I File for Bankruptcy

This is emphatically not true. Many misunderstand that only Chapter 7 bankruptcy involves liquidation, the process in which nonexempt assets are sold to partially repay outstanding obligations. The keyword here is “nonexempt.” Should you choose to file for Chapter 7 bankruptcy, you will be able to use the federal or state exemption schedule and shield certain types of assets from liquidation, including equity in your home and vehicle, retirement plans, furniture, clothing, appliances, and household goods. In other words, with my help, we can work to minimize the impact of liquidation and protect as many of your assets as possible.

Most filers will not lose their homes or vehicles. Some filers do not lose anything at all. The bottom line is that you will not lose everything.

If you file for Chapter 13 bankruptcy, you will not need to worry about liquidation at all. Your debts will be reorganized into a single monthly payment approved by the court. You must pay this monthly amount, which is calculated based on your current ability to pay, for 3 to 5 years. None of your assets are liquidated in a Chapter 13 bankruptcy.

The final important thing to consider is that filing for any type of bankruptcy can actually help you save your assets. If you continue to not address your underlying debt, you will likely lose assets to foreclosure, repossession, wage garnishments, or other court judgments resulting from creditor lawsuits.

By filing for any type of bankruptcy, you immediately benefit from the automatic stay, the court order that puts a stop to all collection actions. This means that any imminent or in-process foreclosures, vehicle repossessions, wage garnishments, or creditor lawsuits must cease until your filing has concluded. In completing your bankruptcy and discharging debt, you will likely be able to meaningfully address or resolve one or more of the problematic debts, protecting your assets in the process.

Myth: Filing for Bankruptcy Will Not Stop Creditor Harassment.

This is not true. Few things are more frustrating than being harassed about debts that you know that you cannot pay. Many creditors violate The Fair Debt Collection Practices Act (FDCPA) by calling at odd hours or using overly aggressive language in the hopes that you do not understand your rights. You can put a stop to the worst of creditor harassment simply by exercising your rights under this law. However, doing so may prompt creditors to pursue lawsuits in an effort to collect.

The good news is that filing for any type of bankruptcy triggers the automatic stay, the court order that halts all collection actions – including all communications from bankruptcy. Once creditors are informed of your ongoing bankruptcy, they cannot directly contact you until your filing has concluded.

By completing your bankruptcy, you will hopefully address the underlying debts that are prompting creditor action. If you cannot directly discharge the underlying debts, you will still be able to discharge other types of debt and gain valuable time to reorganize your finances.

Myth: I Can File for Any Type of Bankruptcy

This is not true. While there can occasionally be some flexibility in what type of bankruptcy you file for, your choices will generally be limited by your current income and other circumstances. If you are filing on behalf of a business entity – including a partnership, limited liability company (LLC), or corporation – you will likely be filing for Chapter 11 bankruptcy.

If you are an individual, you will most likely file for Chapter 7 bankruptcy or Chapter 13 bankruptcy. You will need to complete the Kentucky Means Test to determine which type you can file for. This involves comparing your household’s current income to the state’s median income averages. If your income is less than the median for your household size, you are eligible for Chapter 7 bankruptcy. If your income is equal to or exceeds the median for your household size, you will need to perform additional calculations to determine your monthly disposable income.

If you have a certain amount of disposable income, you may need to file for Chapter 13 bankruptcy. I can help you determine what types of bankruptcy you are eligible for and the implications of each filing type.

Myth: I Cannot File for Bankruptcy If I Am Married

This is not true, but being married does warrant some additional considerations when exploring filing for bankruptcy. You can choose to file for bankruptcy individually or jointly with your spouse. It may make more sense to file individually if you have a substantial amount of individual debt and separate property. Filing individually can also protect your non-filing spouse from any negative impact on their credit rating.

If you choose to file individually, you will not be able to discharge any joint debts that you hold with your spouse. I can help you evaluate your specific situation and advise whether an individual or joint filing will be more advantageous.

Myth: I Can Discharge All Types of Debts Through Bankruptcy

This is, unfortunately, not true. Not all types of debt can be instantaneously discharged through bankruptcy, it is dangerous to assume that you will exit your filing with no debt whatsoever.

Upon completing a Chapter 7 or Chapter 13 bankruptcy, you will usually be permitted to discharge unsecured debts, which include credit card bills, medical debt, unpaid utility bills, and personal loans. You will not be able to discharge secured debts, which can include mortgage payments and vehicle loans. You will also in most circumstances not be able to discharge tax debts, court judgments, spousal support, or student loans.

While you will not be able to discharge all types of debt, filing for bankruptcy can give you the time and tools that you need to reorganize your finances. By being able to discharge other types of debt, you may be able to redirect available funds to addressing debts that you cannot discharge. I can review your obligations and help you understand what types of debt you can expect to discharge.

Myth: I Will Never Have Good Credit Again If I File for Bankruptcy

This is not true. Your credit will take a hit after filing for bankruptcy, but with secured credit cards, you can work to begin credit recovery immediately. Many financial institutions offer secured credit cards and other types of resources to individuals who have recently declared bankruptcy. If you have a credit card with zero balance at the time of your filing, you may also be able to keep that card and continue using it to enhance your credit going forward.

If you keep your mortgage or automobile loan as part of your bankruptcy, making consistent, on-time payments can help you improve your credit in the short- and long-term. Many filers bounce back with higher credit ratings within a few years of their bankruptcies.


At The Law Offices of Mark Little, I am committed to debunking bankruptcy myths in Madisonville and am ready to provide the legal guidance that you need when considering filing for bankruptcy. Call (888) 392-0409 or contact me online today!


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Clients Who Have Found a Fresh Start With Our Help
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