Lyndon Ruhnke, PC
Dispelling Bankruptcy Myths
There are many myths surrounding bankruptcy. From those myths emerge some common misconceptions about the process and the people who use it to get a fresh financial start. If you are considering bankruptcy, you should be aware of what is fact and what is fiction.
Bankruptcy attorney Lyndon Ruhnke has heard his fair share of bankruptcy myths from his clients over the years. If you want honest answers to your questions about bankruptcy, he can deliver. Lyndon Ruhnke, P.C. has offices in Gresham, Beaverton, and Portland, Oregon, please call the one located near you.
In the meantime, here are five bankruptcy myths Lyndon Ruhnke wants to dispel.
Myth 1: Declaring bankruptcy
means I’m a failure.
This myth is not only far too prevalent but also a heartbreaking one for a compassionate bankruptcy attorney to hear. U.S. law provides individuals and businesses the ability to file for bankruptcy when there is simply no other reasonable way to get out of debt. Overwhelming debt takes a tremendous toll on many great people who often are simply the victims of bad luck. The emotional, mental, and physical harm to the health of those who find themselves mired in overwhelming debt can be avoided.
Choosing to file for bankruptcy can be a difficult decision, but is often a wise and brave decision. Even the strongest individual needs a fresh start sometimes. Filing for bankruptcy can provide the financial relief you need, and you should take advantage of it.
Myth 2: My credit score will never recover.
Bankruptcy can lower your credit score for a period of time, but not forever. A Chapter 7 bankruptcy, which discharges most types of debt, typically closes 100 days after filing. A debtor can immediately take steps to rebuild their credit score. If you can avoid missed or late payments, and use credit to pay in full on time, your credit can recover quickly.
The fact that your credit history contains a bankruptcy filing will not prevent you from obtaining a high credit score within two years of filing a bankruptcy. If your debt is overwhelming enough that you need to file bankruptcy, it is likely your credit score is not in good shape anyway. Bankruptcy will at least allow you to place a bookend on a bad credit situation and get a fresh beginning. If your credit is good because you have been able to keep all the financial balls in the air, but you can see the end is coming, your credit score will likely just recover more quickly.
Myth 3: People who file for bankruptcy
have a spending problem.
Many people who file for bankruptcy never made a poor financial decision in their lives. Many people find themselves in overwhelming debt due to circumstances beyond their control, such as incurring unexpected medical debt or the loss of the breadwinner of the family. Others have had poor financial outcomes caused by the national economy and when they were laid off had more debt than they are able to afford to repay.
Whatever the circumstances, debt tends to snowball. A small debt where one missed payment triggers the default interest rate in addition to late payment fees with interest accruing on a daily basis can quickly become a major debt. One of the things your bankruptcy attorney and the bankruptcy process can do is provide guidance that will help you make better financial decisions going forward.
Myth 4: Debt consolidation is a
better option than bankruptcy.
Debt consolidation can be a good thing if you can get all of your high-interest debts paid with one low-interest loan that you can afford. Often that is not possible because of the credit problems you are already experiencing. A debt consolidation loan with a long repayment period and elevated interest rate could end up costing you more and limit your future. The fact is, you have to be able to afford to repay the consolidation loan and you will likely be better off with a Chapter 13 bankruptcy lasting 3 to 5 years, accompanied by protection from creditors and exemptions for your home and vehicle.
Bankruptcy affords you protections that debt consolidation does not. For example, a consolidation loan secured by your home or vehicle places them at risk should you default on the debt consolidation loan. Bankruptcy may protect those assets from your creditors.
Debt relief and credit repair scams are often represented as debt consolidation. Bad actors promise to negotiate or settle debts with all of your creditors only to fail to get many of them to cooperate while charging high fees on all payments you make only to later have those creditors who did not settle sue you. Negotiated payments are reported as settled for less than full value, a negative credit event that is on your credit history for seven years.
Myth 5: Bankruptcy won’t stop
creditors from harassing me.
Upon filing for bankruptcy, the court immediately issues a stay order prohibiting creditors of all debts included in the bankruptcy filing from contacting you, foreclosing on your home, repossessing property, and obtaining any judgments against you in civil court. Your attorney and the bankruptcy court are there to protect you from creditor actions. Because the stay order is issued by the court, you have legal recourse against any creditor who fails to obey it.
Getting Help from an Experienced
Filing for bankruptcy is rarely an easy decision for people to make; however, it is often the best option for getting out from under the burden of debt. Lyndon Ruhnke, P.C. has helped many great, but unfortunate Oregonians, restart their lives unencumbered by debt and armed with information that will help them make better financial decisions in the future.
If you are even considering bankruptcy, you should know the facts. Lyndon Ruhnke can answer all your questions about the process, and how best to move forward allowing you to make the best decision for yourself.