Attorney at Debt Advisors Law Offices

Practice Areas: Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, Stop Foreclosure

Financial distress can affect anyone. When it does, understanding bankruptcy is often very helpful.

Understanding common misconceptions surrounding bankruptcy is also important. If you’re considering filing for bankruptcy to address financial challenges, familiarizing yourself with certain myths about the process can help you make decisions more confidently.

One myth is that bankruptcy represents financial failure. In truth, it can provide a fresh start and serve as a strategic financial tool. 

It’s important to know that filing for bankruptcy doesn’t necessarily mean losing everything; you may protect many personal assets under bankruptcy exemptions.

Additionally, many believe that filing for bankruptcy is extremely costly. That’s not necessarily so. While costs include attorney and filing fees, many bankruptcy attorneys offer payment plans to manage these expenses.

Bankruptcy Myths:

  • Bankruptcy equals financial ruin.
  • You lose everything in bankruptcy.
  • Credit is permanently damaged.
  • All debts can be cleared through bankruptcy.

How does filing for bankruptcy affect your financial future?

Filing for bankruptcy initially impacts your credit and can be considered a significant financial decision. However, it often provides a necessary reset for those drowning in debt, allowing them to wipe the slate clean and start anew. 

Bankruptcy involves discharging certain debts and reorganizing finances under court supervision. Through this process, individuals can gradually rebuild their credit and improve their financial standing. While the bankruptcy will remain on your credit report for 7 to 10 years, adopting good financial habits post-bankruptcy can significantly mitigate its impact over time.

Misconception 1: Bankruptcy Will Ruin Your Financial Future

Many believe that bankruptcy permanently damages your financial prospects. In many ways, the opposite is true. When used strategically, bankruptcy presents an opportunity to restore your credit and financial security.

Reality:

Filing for bankruptcy might give you a fresh start by enabling you to eliminate or reorganize massive obligations. You can start rebuilding your credit right away after filing, even though it will still impact your credit score. Over time, many people experience notable improvements in their credit with sensible financial activity. Participating in financial counseling or similar programs may also help you learn to make healthier financial decisions in the future.

Misconception 1: Bankruptcy Will Ruin Your Financial Future

Misconception 2: You’ll Lose Everything You Own

A common fear is that filing for bankruptcy means losing all personal assets. This false belief may encourage people to get the assistance they require.

Reality: Many Assets Are Protected

Bankruptcy exemptions protect many assets. State-by-state variations exist, but necessities such as your house, car, personal belongings, and retirement assets are generally excluded. Understanding which assets are protected can alleviate the fear of losing everything.

Comparison Table: Exempt vs. Non-Exempt Assets

Asset Type Exempt Assets (Protected) Non-Exempt Assets (At Risk)
Home Equity up to a certain limit High-value property beyond exemptions
Personal Property Necessary clothing, household goods Luxury items, collections
Vehicle Equity up to a certain limit Second or luxury vehicles

Strongly consider meeting with a lawyer to discuss this topic. A qualified bankruptcy attorney can help you understand the particular exemptions available in Wisconsin and how they apply to your situation. This can help protect your essential assets while discharging or reorganizing your debts.

Misconception 3: Filing for Bankruptcy Is an Admission of Failure

Filing for bankruptcy is often seen as a last resort and an admission of failure. Someone who could benefit from bankruptcy might be reluctant to file for it because they don’t want to “admit defeat.”

Reality: Bankruptcy Is a Legal Tool for Financial Recovery

Filing for bankruptcy is a legal tool meant to assist people and companies in overcoming extreme financial hardship. It allows you to address overwhelming debt in a structured way, providing an opportunity for a fresh start.

Misconception 4: You Can Only File for Bankruptcy Once

Some believe you can only file for bankruptcy once in your lifetime. This misconception can cause undue stress and hesitation for those considering bankruptcy.

Reality: Multiple Filings Are Possible Under Certain Conditions

While there are limits, filing for bankruptcy more than once is possible. The key is understanding the waiting periods and conditions of multiple filings. An attorney can help you better understand how these waiting periods apply to your case.

Explanation of Waiting Periods Between Filings

The waiting periods between bankruptcy filings depend on the type of bankruptcy:

  • Chapter 7: You must wait eight years from your previous Chapter 7 discharge to file again.
  • Chapter 13: You can file for Chapter 13 bankruptcy two years after a previous Chapter 13 discharge. If you received a Chapter 7 discharge, you must wait four years before filing for Chapter 13.

“Bankruptcy laws allow for multiple filings, but specific waiting periods and conditions exist.”

Misconception 5: All Debts Are Wiped Out in Bankruptcy

A common misconception is that bankruptcy can eliminate all types of debt. This belief can lead to unrealistic expectations and confusion about the bankruptcy process.

Reality: Certain Debts Are Not Dischargeable

Not all debts are dischargeable in bankruptcy. It’s important to know which debts are dischargeable and which ones are not in order to make an informed decision.

Explanation of Dischargeable vs. Non-Dischargeable Debts

Dischargeable debts can be eliminated through bankruptcy, while non-dischargeable debts remain the debtor’s responsibility.

Comparison Table: Dischargeable vs. Non-Dischargeable Debts

Debt Type Dischargeable (Wiped Out) Non-Dischargeable (Not Wiped Out)
Credit Card Debt Yes No
Medical Bills Yes No
Personal Loans Yes No
Student Loans No, generally Yes
Alimony/Child Support No Yes
Certain Tax Debts No Yes

Get your free consultation

Misconception 6: Bankruptcy Proceedings Are Always Lengthy and Complicated

Many assume that bankruptcy is a drawn-out and complex process. This may deter people from seeking help. However, this misconception needs to reflect the reality of modern bankruptcy proceedings.

Reality: Professional Assistance Simplifies the Process

With the help of a qualified bankruptcy attorney, the bankruptcy process can be straightforward and efficient. Experienced attorneys guide you through each step, ensuring everything is handled correctly and promptly. Allowing a lawyer to handle the process also gives you time to prioritize other life responsibilities.

The Role of Experienced Bankruptcy Attorneys

Bankruptcy lawyers play a crucial role in simplifying the process:

  • Guidance: They provide expert advice on the best type of bankruptcy for your situation. An attorney can even help you determine if filing for bankruptcy is the best course of action in general.
  • Documentation: Attorneys ensure all necessary documents are correctly filled out and filed on time.
  • Representation: They represent you in court and during meetings with creditors, reducing your stress and workload.

Steps to Take Before Filing for Bankruptcy

Taking the proper steps before filing for bankruptcy can ensure the process runs smoothly. Devoting time to these steps now will save you from headaches later.

Steps to Take Before Filing for Bankruptcy

Assess Your Financial Situation

Your first step is to assess your financial situation thoroughly. Take an inventory of your debts, assets, income, and expenses. Understanding the full scope of your financial situation will help determine if bankruptcy is the right solution for you.

Consult with a Qualified Bankruptcy Attorney

Consulting with a qualified bankruptcy lawyer is crucial. An expert lawyer can assist you in making the right decision for your situation, clarify the distinctions between Chapters 7 and 13, and offer insightful information about your options. 

Gather Necessary Documentation

Gathering all necessary documentation is an essential step in the bankruptcy process. This includes:

  • Financial Statements: Recent bank statements, pay stubs, and tax returns.
  • Debt Information: A list of all your creditors, including the amounts owed and the nature of the debts.
  • Asset Documentation: Information about your property, including real estate, vehicles, and personal property.
  • Expense Records: Document your monthly living expenses, including rent, utilities, groceries, and other essential costs.

Having these documents organized and ready will streamline the bankruptcy filing process and help your attorney prepare a strong case on your behalf. In some instances, a lawyer may also help you secure specific pieces of documentation you don’t currently have on hand.

Concluding Thoughts

Filing for bankruptcy can be a major step toward financial recovery. However, it is essential to dispel myths and seek professional advice to navigate the process effectively.

Bankruptcy offers a structured way to address overwhelming debt. Use bankruptcy properly, and you’ll regain control of your financial future. Understanding the realities behind common misconceptions can help you make informed decisions and take the necessary steps toward a fresh start.

Connect with Debt Advisors Today

Debt Advisors is here to help you navigate the complexities of bankruptcy with ease and confidence. Reach out to our experienced lawyers for personalized advice and support.

  • Free Consultation: Get a no-obligation consultation to assess your financial situation.
  • Experienced Attorneys: Work with certified bankruptcy lawyers dedicated to your case.
  • Affordable Services: We offer reasonable fees and transparent pricing with no hidden charges.

By choosing Debt Advisors, you will receive expert legal advice and compassionate support tailored to your needs. Don’t wait to seek help—reach out to us today and take the first step towards a brighter financial future.

Learn about bankruptcy protections, types of bankruptcy, how to get started, what to expect, and who to trust. Filing bankruptcy is the ONLY way to completely eliminate debt. If bankruptcy is right for you, it offers powerful protections that cannot be achieved through alternative solutions such as hardship relief, loans, or debt settlement.

  • Exceptional service. The entire team was friendly and knowledgeable. The attorney took his time to walk me through step by step. I will recommend this law office to anyone!

    J Burks

  • I went through Debt Advisors as a referral by a friend. I am very happy I did so. The staff that I worked with were very helpful and showed a high level of professionalism. They were always able to answer any questions that I had. I was very happy with the attorney that I worked with, Michael Georg. Very professional.

    Terri Grote

  • Attorney Chad Schomburg and Debt Advisors helped me with my debt about three years ago. Chad explained the process to me and answered any questions I had, and the assistants compiled my documentation very efficiently while keeping my case moving forward. They were always available when I needed them, and even years later, I’m able to reach out to them, and they are willing to help. They have turned my life around 100%, and I could not have done it without them! Absolutely recommended!

    Tim Harris

  • They were there for my family from day 1 until the end, 5 years later (Ch. 13). Whenever I had questions or concerns they were always very responsive and gave me excellent advice. Michael and Jeremy are both exceptional bankruptcy attorneys. I highly recommend Debt Advisors.

    Steve

  • After I had to go on disability, I used my credit cards a lot more thinking I could pay them off when I was able to go back to work. That didn’t happen and I found myself so much worse off than I could handle. I went to Debt Advisors feeling terrible about what I had to do. Chad and everyone there were very understanding and put my mind at ease while taking such great care of me. They were there every step of the way and supported me when I was “freaking out”!! Every time I needed to contact them; their response time was amazing!! God forbid I ever need to go through this again, but I know where to turn if I need help! Debt Advisors are more than just filing bankruptcy on my behalf. They really care about what you are going through!! Thank you, Chad, Jeremy, Mike, and everyone at Debt Advisors!! I cannot tell you enough how much I appreciate all of you!! J Hammond

    Steve

  • After I had to go on disability, I used my credit cards a lot more thinking I could pay them off when I was able to go back to work. That didn’t happen and I found myself so much worse off than I could handle. I went to Debt Advisors feeling terrible about what I had to do. Chad and everyone there were very understanding and put my mind at ease while taking such great care of me. They were there every step of the way and supported me when I was “freaking out”!! Every time I needed to contact them; their response time was amazing!! God forbid I ever need to go through this again, but I know where to turn if I need help! Debt Advisors are more than just filing bankruptcy on my behalf. They really care about what you are going through!! Thank you, Chad, Jeremy, Mike, and everyone at Debt Advisors!! I cannot tell you enough how much I appreciate all of you!! J Hammond

    J Hammond

  • Chad Schomburg and his Staff did a phenomenal job for me and in an expeditious manner. I’ve recommend countless clients to Chad Schomburg, Wow!!! Outstanding customer service from the Schomburg office:)

    Lisa Williamson