O'Connor, O'Connor, Bresee & First, P.C.
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Take what creditors say with a grain of salt

If you have been struggling with debt, chances are that creditors have come calling in hopes of getting their money back. Of course, laws on both the federal and state level limit what they can do. For example, the federal Fair Debt Collection Practices Act does not enable collectors to threaten violence or arrest or to call you between 9 p.m. and 8 a.m. State law builds on these protections, saying that creditors cannot tell your employer about why you are in debt, among other matters.

However, creditors and collectors often stray from the path of what the law has deemed permissible. Some are more subtle about it than others, but if they think you are considering bankruptcy, they will try to warn you off. For example, many messages go along the lines of telling you that bankruptcy could cause you to lose your house. Here is a look at why this particular "threat" is misguided and deceptive.

Many people file for bankruptcy and keep their houses

Bankruptcy is far from an automatic "file and lose" process. Quite a few people get to keep their houses, cars and other assets. Under a Chapter 13 plan, you can prevent home foreclosure and reorganize your debts. Under a Chapter 7 plan, you can also prevent foreclosure and get significant debts wiped out, freeing up money for your monthly mortgage payments. Collectors do not know your situation, much less its nuances. They have no idea what your odds are for being able to stay in your house.

Creditors have a vested interest

Creditors typically do not like it when people file for bankruptcy. This is because they fear they may never get their money back. In many cases, they do not. Sometimes, they get only a partial amount back. In any case, they have that big financial incentive to spout inaccuracies about your situation so that you do not file for bankruptcy. An attorney is the person you should be talking to about the possibility of a bankruptcy filing and how it may help or hurt you.

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