They are many urban legends surrounding bankruptcy that are passed along by well meaning yet misinformed people. Below is a list of the more common myths, misunderstandings and stupid tricks I have had clients tell me.
1. You can only file ONCE in a lifetime. No, you can file a Chapter 7 bankruptcy eight years after discharge, but discharge restrictions apply. Consult with your attorney. You can file a Chapter 13 bankruptcy or 11 immediately after the Chapter 7 bankruptcy discharge.
2. My son’s car is in my name and he makes the payments, so it’s his car, not mine. No, if your name is on the title, it is yours and if there is excess equity the trustee will take the car or require a buyback/repayment of the excess equity.
3. By law I am allowed to keep my car; they cannot take it. No, there is no such law. If you have excess equity in the motor vehicle the trustee can and will take the car. I have seen trustees take the keys at the 341 meeting and debtors not have a ride home. The trustee does not care if you have a car to get to work or not.
4. They can't take my savings. I am paying my property taxes with it. Yes, they can and will.
5. They can't take my tax refund. I earned it. Yes they can and will.
6. They can't take my mutual fund it is for my retirement. Unless the mutual fund is a part of an IRA or under 401, 403, 408 or 457 of the IRS Code, they can and will take it.
7. I’ll just give my expensive non-exempt asset to my friend and then I don’t have it and they can't take it. You must disclose under oath with the penalties of perjury all transfers within one year of filing. Not only is this bankruptcy fraud, the trustee could come after your friend also.
8. I paid Grandma $3,000 two months before filing, she spent it, the trustee can't do anything about it. Wrong, the trustee can have you repay the money to the bankruptcy estate, withhold the discharge (which means the creditors have six years to sue and collect), or the trustee can sue Grandma or convert you to a Chapter 13 bankruptcy.
9. I am on the deed to Grandma's house, but only for probate purposes. It is her house, the trustee can't touch her house. If you’re on the deed it is YOUR house, too, and the trustee can sell it.
10. If I go bankrupt I can keep my house and car and not have to make payments. This is so stupid it needs no explanation.
11. Let's not tell the trustee I own a Rolex. Let's find another attorney, I did not spend three years of my life and $90,000 plus to hide your crap. If you intend to hide assets do NOT even think of calling my office. I don't need business that badly.
Again, we apologize for the serious tone of these warnings. It is our obligation to make you aware of these things. If there is anything that you have not understood please ask us for further clarification. And, PLEASE don't forget to get the 'Personal Property Inventory to us ASAP so that we can complete your petition.
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