FAQ – Bankruptcy Myths

Don’t be Fooled – Conquer Your Debt!

The average American hears the word bankruptcy and only images of losing all of your possessions and permanently ruining your credit are conjured up.  Most of the information you might have heard is probably incorrect. The purpose of this list is to dispel some of the most common bankruptcy myths – Don’t Be Fooled!

It is important to remember that Bankruptcy is by far and away the most powerful consumer protection law you can utilize to Conquer Your Debt! We work hard with our clients to educate them and help eliminate the fictional ideas that creditors and others spread regarding filing for bankruptcy. It can be hard to discern fact from fiction when making the difficult decision to file a Chapter 7 or Chapter 13 bankruptcy case. Too many people are scared by the “myth” of bankruptcy, instead of the “truth” of bankruptcy and put up with creditor harassment far too long. Don’t be one of them!

Below are a few common misconceptions regarding bankruptcy filings and the fact behind the fiction to assist you making this difficult, but often necessary, decision:

Myths

REALITY: Not True. In fact, nothing could be further from the truth. If you could file under the “old” laws, chances are you can still file under the “new” laws. The truth is that you can do almost everything under the NEW law that you could do under the OLD law. In some ways, the new law actually increased the benefits of filing bankruptcy. The NEW laws have actually made filing a more orderly and predictable process, a major benefit when strategizing over the right direction to take.

As it turns out, and it is critically important to understand this, many clients are getting a better break under the NEW law, than they would have received under the OLD law!

Surprised? So were we at first, but it’s the truth. Find out for yourself.
Just call toll free _____________ set up a totally FREE initial consultation.

REALITY: Nothing could be further from the truth. The fact is most people who file bankruptcy don’t lose anything. Well over 95% of bankruptcy cases filed by individuals are "no asset" cases in which the debtor keeps everything he owns!

How can this be? It is because most personal property is classified as exempt, meaning that you can keep it, even after receiving a debt discharge in bankruptcy. The Bankruptcy law usually allows you to keep your home, cars, furniture, appliances, retirement savings and other items. The property that can be claimed as exempt in bankruptcy varies from state of state,  however New York recently greatly expanded these exemptions; including a new “wildcard” exemption that can be applied to any asset. Most of the Chapter 7 clients we assist LOSE NOTHING when filing. In the rare situation where there is more property than can be protected by available exemptions, there is Chapter 13. In Chapter 13, you can even keep this property by paying a Chapter 13 plan payment.

REALITY: This is a myth that continues to be perpetrated on the public. On the contrary, you will get credit again! The negative impact of bankruptcy on your credit is greatly exaggerated. Bankruptcy is often no more harmful to your credit record than the defaults that preceded the bankruptcy. Remember:  The bankruptcy laws are designed to provide you with a fresh financial start. Filing bankruptcy gets rid of debt, and getting rid of debt puts you in a position to handle more credit, and this makes you look more attractive to would-be lenders. In my experience, it won’t be long before you’re getting credit card offers again.

At first, the lenders may want more money down and will want to charge you higher interest rates. However, over time, .if you are careful, and keep your job, and start saving money, and pay your bills, and do things that will put positive marks on your credit report, the quality of your credit will improve. Generally, in my experience, if a client has not re-established good credit in 18 to 24 months, sufficient to buy a car or even a house, it’s not because they filed bankruptcy. It generally means that something else has happened after the bankruptcy to hurt their credit.

Moreover, we commonly assist our clients in variety of ways in credit restoration. One of those is obtaining a debit credit card that reports to the credit bureaus. These cards are backed by money that you deposit in a special account. As you make your various payments every month, the cardholder reports this information to the credit bureaus: this is a very powerful tool in helping you re-build your credit.

REALITY: Not true. Don’t get 2 completely different concepts confused with each other. The fact that bankruptcy is reported on your credit report for several years, does NOT necessarily mean it will have a negative effect on your credit standing for that period of time.

The truth is, by the time you need to make an appointment to see a bankruptcy attorney, your credit is usually already damaged. You have no credit for bankruptcy to hurt! Post Bankruptcy use of credit is much more important than the fact that an “old” bankruptcy lingers on your credit report.

REALITY: This is NOT true. In fact, nothing could be further from the truth. The minute you file bankruptcy, the Bankruptcy Court issues an order telling all of your creditors to leave you alone! No more phone calls. No more collection letters. No more lawsuits. No repossessions. No foreclosures. Nothing. This order has a name. It is called the “automatic stay”; and it is issued pursuant to the Federal Bankruptcy Laws. The automatic stay prohibits you from any and all collections actions. After you file bankruptcy, the creditor is not even allowed to talk to you. In addition, the creditor must stop any collection attempts already started. The automatic stay is very powerful, and puts the full weight of the United States Courts to work for you, to make sure your creditors leave you alone. If a creditor violates the automatic stay, you have the right to bring the creditor before the Court for Contempt of Court, and to be compensated accordingly. Believe me, Bankruptcy Court Judges do not take kindly to creditors who ignore the automatic stay, and these Judges have been known to punish creditors severely. Very simply, once you file for bankruptcy, creditors must leave you alone or suffer the consequences.

REALITY: Not true. In many cases, where both husband and wife have a lot of debt, it makes sense and saves money for them to both file, but it is never a requirement under the law. We have many cases where only one spouse has filed; the non-filing spouse’s credit is generally preserved. When one spouse files for bankruptcy, as long as none of the debts scheduled by you are joint debts with your spouse, your spouse’s credit is generally not affected. Also, the fee is the same for a one or two-spouse filing.

REALITY: Unless you’re a famous person or a major corporation and the filing is covered up by the media, the chances are very good that the only people who will know about a filing are your creditors and the people who you tell. While it’s true that your bankruptcy is a matter of public record, the number of filings is so massive, that unless someone is specifically trying to track down information on you, there is almost no likelihood that anyone will even know you filed.

REALITY: It is a violation of Federal Labor laws for an employer to discriminate against an existing employee because they filed for bankruptcy.

REALITY: You are required to list all of your debts in your bankruptcy schedules, even those, such as mortgages, automobile loans and other secured debts that you may still continue to pay voluntarily, on a monthly basis, after bankruptcy. In addition, even if a debt is discharged, you still have the right to voluntarily repay any debt. The concept behind bankruptcy is full disclosure brings full discharge!

REALITY: Not true.  Your immigration status is not affected in any way by filing for bankruptcy

REALITY: Some personal income tax liabilities may be discharged in either a Chapter 7 or Chapter 13, reorganization, proceeding. The criteria for discharge is complex and should be reviewed by our experienced bankruptcy attorneys.

REALITY: Most of the people who we assist in filing bankruptcy are good, honest, hard-working people, just like you and me. If you are reading this now, you should be applauded. You are taking a positive step to regain control of your financial situation and plan for the future. You have acknowledged that a problem exists and you are taking action to address it. Life sometimes throws us curves that we never could have imagined. The bankruptcy laws have been designed to help people address their financial difficulties in an honest, straightforward manner

They file as a last resort, after months or years struggling to pay the bills that left over from some life-changing experience, such as a divorce, the loss of a job, a failed business venture, a serious illness, or some family emergency. Some because they honestly and mistakenly fell into debt at a young age before they knew better or before they knew anything about budgeting or how to manage money.

Remember: Bankruptcy is a safety value to prevent individuals from being buried by debts they can never repay.

There’s a reason over 1,000,000 Americans file bankruptcy each year and it’s not because they’re bad people. Lots of good, honest, hard-working people fall on hard times. The bankruptcy laws were created with this in mind, to make sure you have a way, if need be, to get free from the burden of debt so that you and your family can have a second chance at a “fresh start”.

REALITY: No it’s not, at least not in the hands of an experienced bankruptcy attorney. The typical Chapter 7 case takes approximately 4-5 months from the date that the petition is filed until the date that a discharge is issued by the Bankruptcy Court. The bankruptcy process, while complex and sometimes confusing to the average person, is a relatively straightforward process when you are working with an experienced bankruptcy attorney.

Contact my office today for your free consultation to help you get clear on what is myth and what is reality. As your bankruptcy attorney, the truth about bankruptcy is your first step in Conquering Your Debt!