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Three misconceptions about bankruptcy that consumers should beware of

Divorced parents who wish to relocate with a child in Colorado must give notice and obtain approval if the proposed move is geographically substantial.

Debt is an issue that most people in New Jersey and other states struggle with. As CNBC reported in 2015, about eight in ten Americans hold some form of debt. Due to issues such as rising living costs and sluggish wage growth, this debt may eventually become an unmanageable burden for many consumers.

For these individuals, filing bankruptcy may be an effective way to obtain relief. Unfortunately, many people fail to seriously consider this option because they suffer from misconceptions about it. It is critical for consumers to steer clear of the following myths when considering whether to file bankruptcy.

1. Eligibility issues

Many people rule out the idea of filing bankruptcy because they assume they do not qualify. However, many consumers who are struggling with debt may meet the following criteria:

· Low income - People whose income falls below the statewide median for households of comparable size may be eligible for Chapter 7 bankruptcy.

· Limited disposable income - People with minimal disposable income may also be able to file under Chapter 7. Consumers who do not meet this criterion may be eligible to file Chapter 13 bankruptcy instead.

· Qualifying amount of debt - There are no debt limitations in Chapter 7 bankruptcy. Chapter 13 bankruptcy may be an option for people with secured debts of less than $1,184,200 or unsecured debts of less than $394,725.

Some people may also think they cannot file bankruptcy because they have already done so. However, a person may file again if enough time has passed since the last debt discharge. The waiting period varies from two to eight years, depending on the chapter of bankruptcy filed initially and presently.

2. Effects on property

Another common myth is that filing bankruptcy will cause a person to lose all of his or her property. In Chapter 13 bankruptcy, property loss can typically be avoided completely. Chapter 7 bankruptcy does require the liquidation of property, but New Jersey residents may claim various assets as exempt under state or federal law. Additionally, consumers may keep certain property - such as vehicles and houses - by reaffirming any associated debt.

3. Lingering impacts

A final harmful bankruptcy myth is that filing will have irreparable negative effects on a person's employment and credit. In reality, employers are prohibited from firing or otherwise discriminating against employees who have filed bankruptcy. In terms of credit, discharging debts through bankruptcy may actually help a person begin rebuilding credit sooner. Although bankruptcy stays on a credit report for 10 years, this does not necessarily preclude a person from securing credit during that time.

Limiting misunderstandings

Given the complexity of bankruptcy law, the potential for misconceptions is high. To avoid making decisions based on these misunderstandings, people who might benefit from filing bankruptcy may want to consider consulting with an attorney. An attorney may be able to provide needed clarity and help a person evaluate whether filing bankruptcy could be a beneficial choice.

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  • NACBA | National Association of Consumer Bankruptcy Attorneys
  • NACA | National Association of Consumer Advocates
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Goldman & Beslow LLC

Goldman & Beslow, LLC is a Federal Debt Relief Agency by an Act of Congress. We have proudly assisted consumers seeking relief under the U.S. Bankruptcy Code for over 38 years.

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