Bankruptcy Myths

Dallas Bankruptcy Attorneys – Dispelling Bankruptcy Myths

TX Debt Relief Lawyer; Helping You Make Informed Decisions About Your Future

The mere mention of the word “bankruptcy” causes disquieting emotions in most people. Well meaning co-workers or family members can contribute to the problem, by placing their own moral spin on what has traditionally been a taboo subject.

Up until the mid 1800s, debtors were routinely thrown into prison and separated from their families until they paid their debts or died in debtor’s prison. Sadly, the undercurrent of fear and unfounded notions about bankruptcy seem to carry on through the generations.

The Dallas bankruptcy attorneys at Fears Nachawati Law Firm know that any unforeseeable event, like a family illness or divorce can lead to financial instability.

Choosing Bankruptcy is a Positive Step Forward

Bankruptcy no longer carries the “black mark” it did in your parent’s day — before the housing bubble and the current economic recession. Choosing bankruptcy allows you a fresh new start.

Here are some of the bankruptcy “myths” that carry no merit:

  • Myth #1 – I won’t have credit for the next 10 years. There go my plans to buy a house or a car for the next decade.

There is life after bankruptcy. Instead of experiencing a permanent drop in your credit score, you may see an increase in your credit score within 12 to 18 months after filing. Your debt to income ratio will likely be improved. You’ll have disposable income to pay your debts on time. If you take steps to improve your credit score, you will likely be able to buy a house or car within a few years (with a good interest rate).

  • Myth # 2 – someone will come to my house to value my assets. They will rifle through my things and my assets will be seized and liquidated. I will lose everything.

Although your assets will be listed in your bankruptcy paperwork and submitted to the bankruptcy Court, the simple truth is that “No one will come to your house.” In most instances, your property is not liquidated, due to federal and state bankruptcy exemptions that protect your home, car and other personal property. A knowledgeable attorney from Fears Nachawati Law Firm will use every available exemption to help protect your assets from your creditors.

  • Myth #3 – I won’t be able to contribute to my retirement account during bankruptcy.

Most retirement plans are exempt and continued contributions are generally permitted during bankruptcy. If retirement funds are withdrawn, however, they are no longer exempt and are not protected under bankruptcy.

A debtor should never withdraw funds from his retirement account to pay mortgage payments, car notes, medical bills or other overdue bills. There is no need to jeopardize your future financial health by squandering your nest egg. Your unsecured debts like credit card bills and medical expenses could be wiped clean in a Chapter 7 bankruptcy within 6 months.

In a Chapter 13, overdue house or car payments can be paid slowly over time, until your accounts are brought current. During the repayment plan, debtors make monthly payments to their Trustee, using their earned income; their assets should never be liquidated to pay creditors.

Under federal bankruptcy law, your 401(k), 403(b), 408, 408A, 414, 457, or 501(a) retirement plans are exempt in a Chapter 7 bankruptcy. Federal bankruptcy exemptions also apply to other tax exempt retirement accounts, such as money purchase plans, defined benefit plans, profit-sharing, SEP and SIMPLE IRAs.

Making Informed Decisions about Your Financial Future

Separate fact from fallacy by calling Fears Nachawati Law Firm at to obtain more information about debt relief through bankruptcy. Our TX debt relief lawyers offer free consultations and affordable payment plans to help you get on track, financially.

“Thank you very much for your follow up emails. I appreciate your time to do so. I am especially indebted to Rebecca for her time and excellent advice. She is a natural “teacher” and her explanations were clear and easy to understand. I could not have asked for better treatment in any way. She has great people skills, so be good to her. She is an excellent addition to your firm and represents it well.”


— Garland, TX