Dispelling Bankruptcy Myths
For most people, the word bankruptcy can be terrifying, evoking images of losing everything and being forced to live on the streets, though that’s a pretty extreme interpretation. In truth, bankruptcy is a federal statute that allows individuals, families, and even businesses to discharge their unsecured obligations and attain a fresh start in life while retaining all or most of their real and personal property, including a residence and a vehicle.
Of course, everything depends on one’s personal situation and on exemptions allowed in the state where you live. The federal bankruptcy code allows for various types of bankruptcy, but for most individuals and families, Chapter 13 and Chapter 7 are the most common options.
Chapter 13 is known as “the wage-earners plan” which allows for a reorganization of debt obligations, and Chapter 7 is known as the liquidation plan. Liquidation means the bankruptcy court can seize and sell certain assets which cannot be protected, if any, to fully or partially satisfy unsecured creditors' debts, though federal and state exemptions usually fully protect all prospective bankruptcy petitioners' assets from seizure or sale by the bankruptcy Trustee or creditors. In reality, no clients of The Law Offices of Marc G Alster have ever involuntarily had an asset involuntarily seized or sold by the Bankruptcy Court or Trustee. In other words, Mr. Alster has never approved a Chapter 7 Bankruptcy case in over 30 years where there was an involuntary or surprise sale by the Bankruptcy Court or Trustee.
If debt is overwhelming for you in or around Hackensack, New Jersey, and you wish to pursue a fresh start through bankruptcy protection, contact The Law Offices of Marc G. Alster. Mr. Alster has more than three decades of experience assisting clients achieve a new financial fresh start through bankruptcy. He will listen to your circumstances, advise you of the best options, and help you navigate the system until your dischargeable debts are behind you.
The Law Offices of Marc G. Alster also proudly serves clients throughout northern and central New Jersey counties, including Bergen, Passaic, Hudson, Essex, and Union, as well as counties in New York such as Rockland, Westchester, Orange, and Putnam.
Common Myths and Misconceptions About Bankruptcy
As mentioned at the start, bankruptcy is a scary proposition for most people because of a body of myths and misconceptions about what it entails. However, many individuals have gone through the process only to thrive after the conclusion.
Here are some common myths and misconceptions with answers:
Bankruptcy permanently ruins your credit. While it’s true that your bankruptcy filing will appear on your credit report for years after you petition – 10 years for a Chapter 7 and 7 years for a Chapter 13 – you can begin rebuilding your credit almost immediately.
It’s not uncommon for credit card and auto companies to begin offering you deals while you’re still in bankruptcy and certainly, after you’ve been discharged. However, you have to look carefully at the fine print. Interest rates can be high, and other fees may be required. Still, the door is open.
Depending on your income and type of filing, you can even purchase a home sometime within months or usually at most within a couple of years of receiving your Discharge Order. This is not to say that bankruptcy is an open door to credit, but it’s not a closed one either. Carefully explore your options.
Bankruptcy discharges all debts. Not exactly true, but bankruptcy will discharge most unsecured obligations such as credit cards, personal loans, and medical bills, (the primary causes of Chapter 7 bankruptcy filings), but will not discharge most secured obligations, such as auto loans and mortgages, where debtors' have equity in their real property/homes or cars. Also, most student loans, child and spousal support, and recent, unpaid taxes are not dischargeable. However, with the US Attorney General's and Department of Education's recent enactment of new guidelines concerning their policies, it has become much easier for good faith debtors to discharge their federal student loan debts. See other articles and blogs on this subject in this website.
You lose all your possessions. Not true, since both the federal bankruptcy code and most state bankruptcy codes allow exemptions for most property/assets, including equity in a home or a vehicle, home furnishings, tools of the trade, and more; these exemptions almost always completely protect debtors' assets from being seized or sold by the Bankruptcy Trustee or Court. Also, retirement accounts and public benefits are fully protected from seizure. In this regard, prospective bankruptcy petitioners should not take funds from protected retirement savings to pay bills if filing for bankruptcy is even a remote possibility (if a petition is subsequently filed doing this would likely become akin to throwing money out the window).
You can only file for bankruptcy once. Hopefully, you will only have to file for bankruptcy protection once, if at all, but you can file more than one time, although federal law places time limits as to how frequently bankruptcy petitioners are able to discharge their debts in bankruptcy. For instance, if you file for a Chapter 7 bankruptcy, you must wait eight years before being able to receive another Chapter 7 Discharge Order, and four years before being able to receive a Chapter 13 Discharge. If your dischargeable debts were discharged in a Chapter 13 proceeding, you will not be able to receive another Chapter 13 Discharge Order again for two years.
If you are married, you both have to file. This can get a bit complicated but, for the most part, both spouses do not have to file jointly for bankruptcy protection; often only one spouse files for protection - naturally debts owed by the non-filing spouse would not be discharged at the end of a successful case (whether they are joint debts owed with the filing spouse or individual debts of the non-filing spouse). If one spouse has run up huge debts that are not in the non-filing spouse’s name, then an individual filing would likely be pursued. In New Jersey it's important to keep in mind that each spouse is legally responsible for the other spouse's purchase of necessities; however, legal actions to pursue these types of debts are very rare.
Personal and Professional Legal Guidance
At a time of overwhelming debt, you need compassionate and understanding legal counsel regarding your bankruptcy options. A Chapter 13 filing can help you retain all your possessions, but it can take three to five years before the process comes to fruition. A Chapter 7 can be over in months; although some assets may be subject to sale by The Bankruptcy Trustee to fully or partially satisfy debts owed to creditors, this is very rare.
If debt is overwhelming you in or around Hackensack, New Jersey, or in certain counties of New York, reach out to The Offices of Marc G. Alster to discuss your bankruptcy options and get a fresh start in life.