Saturday, April 14, 2012

It's worth repeating: Common Myths about Bankruptcy.

1.   Bankruptcy is for dead beats.
NO!  Most people I deal with are honest but unfortunate debtors.  They really want want to pay their bills.  But, with the loss of a job, lowered income, retirement, loss of a spouse, divorce,  or other financial issues, hard times can hit anyone.  Bankruptcy is a perfectly legitimate way of handling financial hard times - Congress enacted the Bankruptcy Code to give the honest but unfortunate debtor a "fresh start". 

2.   Bankruptcy is only if I am broke.
 No, bankruptcy can be a tool to keep your house, catch up on mortgage arrears when the bank won't work with you, a way to get rid of credit card debt or high medical bills, and in many instances a way to get rid of a second (or third) mortgage for which there is no equity.  In fact, in most of the bankruptcy Chapters (like Chapters 11, 12 and 13) you cannot be "broke" and you need sufficient income or assets to make your plan payments.
In Chapter 7, you may be without income or assets.

3.   Bankruptcy will take way all of my assets.
NO!  The Bankruptcy Code has a schedule of exemptions, which allow the debtor in bankruptcy to reasonably keep his or her assets.  (click onto my articles on "exemptions")

4.   I will never have good credit again.
That is up to you.  Anyone can rebuild their life, their credit.  You need to pay your bills on time and only obtain the amount of credit you can handle. 

5.    Bankruptcy will make me lose my job. 
The most common answer is "no".
The Bankruptcy Code says that "no private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title".  There are a few cases where an employer has been allowed not to hire someone because of bankruptcy status. The Code also says that "a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title."      

6.   All debts are discharged in bankruptcy.
Most are discharged, a few are not such as recent IRS debt or domestic support obligations or debts incurred fraudulently- (click onto my articles regarding "discharge").

7.   The IRS will never go away.
Well, depends on how you look at it.  Stale taxes, meaning most income taxes that are many years old, may be discharged - this requires a closer look to make a determination.

8.    Once I file for bankruptcy, I can never file again. 
Incorrect! click onto my article under "bankruptcy" regarding "timing". 

1 comment:

  1. You have pointed out some critical points about bankruptcy and these are use full, I have same points from real estate lawyers nyc when I had a met them once upon a time.