Bankruptcy in Pennsylvania: Myths v. RealityNovember 8, 2012
Myths and Realities in Bankruptcy
Many people have misconceptions about bankruptcy and what it means to them. This post is devoted to dispelling some of the various myths that I have encountered from discussions with my clients. As with all of the posts provided by my firm, this is general advice and is not intended to apply to every individual debtor. However, these general concepts should help dispel some of the fears and myths associated with bankruptcy in Pennsylvania.
First, there is a common myth that a bankruptcy debtor must turn over all of his/her property to the Court. This is generally not the case. In fact, most bankruptcy debtors keep all of the property that they own at the time of bankruptcy. The reason for this is every bankruptcy debtor is eligible to keep certain property based on exemptions provided for in the Bankruptcy Code. Please consult an attorney for specifics, but this allows most people to keep their house, cars, bank accounts and most importantly any retirement savings.
Secondly, many people believe that filing a bankruptcy is very expensive. To the contrary, bankruptcy attorneys often offer free consultations to discuss whether or not to file a bankruptcy and the bankruptcy fees charged by attorneys are generally reviewable by the Court or Court-appointed Trustees to make sure that they are fair and reasonable.
Thirdly, many bankruptcy debtors are concerned that if they file bankruptcy, they will never be able to obtain credit again. Their fear is that they can no longer borrow money for an automobile or take out a mortgage for a house. To the contrary, while the bankruptcy discharge will remain on a debtor’s credit report for up to ten years, most people will again have access to credit after their bankruptcy discharge. This does not mean that credit will be available at market rates, but credit will be available and creditors will evaluate the interest rate based on the credit worthiness of the former bankruptcy debtor. Obviously, a discharged bankruptcy debtor’s credit score will improve over time as the bankruptcy debtor continues to earn a living and pays his/her bills on time.