Valley News -

By Morton J. Grabel
Special to Valley News 

Bankruptcy folklore busted and other tales of fantasy


Last updated 9/7/2018 at 4:37pm

Many people stay away from filing for bankruptcy because of inaccurate information from friends, family, co-workers and the media. The misinformation usually stops people from seeking the assistance of a bankruptcy lawyer who can help them understand how bankruptcy can help.

The most common bankruptcy concern is whether a homeowner can keep their home if they file for bankruptcy.

If they are current on their mortgage payments and there is no equity in the home, then generally the homeowner can keep their home when filing for bankruptcy. If they are behind in their mortgage payments, then Chapter 13 bankruptcy may be available to help them catch up on the payments and keep the home.

Even when the home has equity in various instances, some if not all the equity can be protected in a bankruptcy.

A similar concern is can a person keep their car if they file for bankruptcy.

If they are making payments on the vehicle, however, in the majority instances as long as they continue to make payments on the vehicle and sign a reaffirmation agreement, car owners will generally keep the vehicle. If the vehicle is paid in full, in a number circumstances the equity in the vehicle can be protected.

People are often concerned that their credit will be ruined for the next 10 years if they file for bankruptcy.

And although a Chapter 7 and 13 bankruptcy can legally remain on their credit report for 10 years, it does not mean their credit will be ruined for the next 10 years. Most people can get their credit score to a good level after only three years.

Also, in most cases, household goods and furnishings will not be touched by the bankruptcy court or creditors. These items are generally protected by California bankruptcy exemptions which stop creditors to satisfy the debts.

If debtor provided accurate and non-fraudulent information on their bankruptcy petition and obtained a discharge from the bankruptcy court; afterward, creditors cannot seek to collect on any debts that were discharged, once the case is closed.

Another concern is whether or not they’ll be able to obtain credit after filing, but most people have no problem obtaining credit cards after bankruptcy. In fact, there are companies that cater specifically to extending credit to people who have filed bankruptcy.

Generally, most individuals who have filed for Chapter 7 bankruptcy are able to qualify to purchase a home after 3-4 years. In Chapter 13 bankruptcy, they will have to seek the permission of the court if the bankruptcy case is still pending.

Federal bankruptcy law was created specifically to help people where they cannot afford to pay their debts. There is nothing unethical or immoral about using federal law to legally eliminate debts.

Those who have recently moved to California, do not necessarily have to file for bankruptcy in the state from which they moved. Federal venue rules allow them to file for bankruptcy where they have resided for the greater part of the 180 days before filing for bankruptcy. It means someone can have resided in California for as little as 91 days and file for bankruptcy in the California.

Please note by reading the information above and herein, no attorney-client relationship has been created. The information provided is not to be relied upon as legal advice for specific legal needs. Those who have legal questions can contact The Law Offices Morton J. Grabel in Temecula at (951) 695-7700. Mort, originally from Philadelphia, Pennsylvania, attended an American Bar Association Law School, has an MBA, a real estate broker’s license, a CA nursing home administrator’s license and is a member in good standing of various local chambers of commerce.


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