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Common Bankruptcy Myths

Bankruptcy Attorney in Teaneck, New Jersey

You no doubt have heard the myths about bankruptcy. Most people are terrified of filing for bankruptcy even when it would easily and smoothly save them from financial ruin. In reality, in most all cases, debtor(s) end up in a stronger financial condition after bankruptcy than if they just let their creditors remain unpaid. Irrational fears often hold people back from at least speaking with an experienced bankruptcy attorney. We hope that by dispelling some of these myths we can help you determine whether bankruptcy is the right course for you. Here are some examples of common myths about bankruptcy filings:

Myth I: Bankruptcy is difficult

While there are many rules that must be followed pursuant to the U.S. Bankruptcy Code the process may seem extremely confusing for a debtor. As long as you have a competent lawyer who handles personal bankruptcies on a day to day basic, the process should be smooth and straightforward in almost all situations. At the Law Offices of Marc G. Alster, you will personally meet with Mr. Alster who has handled hundreds of bankruptcy cases for over two decades. After hearing your circumstances, Mr. Alster will be able to tell you if there are any potential pitfalls to your filing for bankruptcy protection, or if your case should be smooth and straightforward as over 95% of Mr. Alster's personal bankruptcy cases are.

Myth II: I will lose all my property if I file for bankruptcy

Nothing is further from the truth. 95% of individuals filing for bankruptcy do not lose any of their property. Not a single client of the Law Office of Marc G. Alster has ever involuntarily lost an asset to a creditor. Many assets are protected by bankruptcy exemptions in the U.S. Bankruptcy Code. Mr. Alster will advise you how the Bankruptcy Exemption Laws would work in your case, at your free consultation.

Myth III: If I file for bankruptcy, my credit will be hurt for 10 years

Not true. It is true that a Chapter 7 bankruptcy filing is supposed to be reported on your credit report with the three (3) national credit reporting agencies, Equifax, TransUnion and Experian for 10 years. However, this does not mean that you will have bad credit for 10 years. While your bankruptcy filing will be reported to the reporting agencies, your credit score will also reflect what you do after the filing of your bankruptcy case. Your credit score will reflect all post-bankruptcy car payments, mortgage payments, secured credit card payments and unsecured credit card payments, etc. If you make timely post-petition monthly payments to your creditors, you credit score will steadily get better thereby rebuilding your credit. If you are considering filing for bankruptcy, it is likely that your credit is already in bad shape. By the time you receive The Bankruptcy Court's Discharge Order in a Chapter 7 case, which is approximately 4-5 months after the petition is filed, the debtor(s) unpaid balances previously contained in their Credit Reports should already be changed to $0.00. Thus, for the vast majority of our clients, filing a bankruptcy petition becomes the first step in rebuilding their credit. If a debtor(s) has a steady job and paycheck, credit can be reestablished within approximately 2 years after filing for bankruptcy protection.

If you file Chapter 13 bankruptcy, you most likely have a mortgage payment(s) or car payment(s) that you will resume making pursuant to your Chapter 13 Plan. If you are able to make these post-petition payments in a timely manner, your credit scores will increase even while your bankruptcy case remains open.

Myth IV: Only a deadbeat would file bankruptcy

Thousands of responsible people have to file for bankruptcy protection each year. The overwhelming majority of people that file for bankruptcy protection are hardworking Americans just like you and me. Something has happened in their lives, i.e., losing a job, getting a divorce, or medical bills incurred from an illness or accident, which has caused them to have to file for bankruptcy protection. Many top businessmen and respected individuals have a bankruptcy filing in their past, and it is not correct to consider anyone a deadbeat when they take advantage of the opportunity given to them by the U.S. Federal Government for well over a hundred years to get a "fresh financial start." In fact, in 2010 approximately 1.5 million Americans filed for Bankruptcy protection; this is very close to the number of Americans who graduated with a 4 year Bachelor's degree from U.S. colleges and universities in 2010.

Myth V: If you are married, both spouses must file bankruptcy

This is not true. One spouse can file bankruptcy and the other spouse's credit rating would not be affected and would not otherwise be involved in the bankruptcy at all. The non-filing spouse often benefits from the Bankruptcy filing of their spouse, as creditors are no longer able to call the debtor(s) home. In many cases, a filing by only one spouse makes sense if a large portion of the debt owed is under the name of only one spouse, and the other spouse has a good credit score with the three national credit reporting agencies, Equifax, Experian and TransUnion. This can occur in a marriage when one person entering the marriage comes in with huge debts. For more information see article in this website entitled Bankruptcy and Spouses.

Myth VI: It is okay to run up your credit cards prior to filing bankruptcy

Don't try this - it is not true. If you recently put a lot of charges on your credit cards just prior to filing bankruptcy, especially for non-necessities, creditors may file an adversarial complaint with The Bankruptcy Court seeking The Bankruptcy Court to not allow the debt(s) incurred in bad faith to be discharged with the debtor(s) other debts. If this happens, debtor(s) would remain liable for these debts incurred in bad faith. More importantly, once the Court appointed Trustee smells bad faith by the debtor(s), the whole bankruptcy case could be subject to dismissal by either the U.S. Trustee's Office or the Chapter 7 or 13 Trustee appointed by the Bankruptcy Court to oversee the debtor(s) case.

Myth VII: If I file, I will lose my job or not get a new job

In almost all cases, employers will not find out about an employee's bankruptcy case unless the employee chooses to tell them. Either way, most employers are not allowed to fire, or take any other adverse action against an employee who files for bankruptcy protection.

Myth VIII: Bankruptcy will not help me because I owe taxes

While it is true that some taxes cannot be discharged, others can be. There are many rules to discharging taxes that Mr. Alster will explain to you during your free consultation.

Myth IX: Everyone will know that you have filed for bankruptcy

Unless you are a prominent person or a major corporation and the media picks up the filing, the chances are very good that the only people who will know about your filing are your creditors and anyone you decide to tell. While it is true that a bankruptcy filing 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 very little likelihood that anyone will know that you have filed. As for newspapers, our experience is that because of the large number of filings, there are few publications that have the space, the manpower or the interest in running the names of debtors filing for bankruptcy protection. Think about it, even if they did who would be interested enough to read that stuff.

Myth X: You can only file once for bankruptcy protection

The truth is that you can only file for Chapter 7 protection once every eight (8) years. After 8 years, if need be, you can file for Chapter 7 bankruptcy protection again. As for filing a Chapter 13, you would have to wait four (4) years after receiving a Chapter 7 discharge to file a Chapter 13 case, and likewise, if you received a Chapter 13 discharge you would have to wait four (4) years before filing a Chapter 7 case. Hopefully, you will never need to file more than one bankruptcy.

Looking for an attorney for a bankruptcy case in Hackensack, NJ? You do not have to let the uncertainty of bankruptcy myths prevent you from taking a step toward a brighter financial future. Please call our firm today to learn how we can help.

The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.

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