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Considering bankruptcy? Don't operate under these misconceptions

Federal bankruptcy laws have been around for a long time, and readers may already be familiar with the general concepts of a Chapter 7 liquidation versus a Chapter 13 reorganization. Nevertheless, our bankruptcy attorneys have observed several common misconceptions. For anyone considering the protections and fresh start that a bankruptcy filing may offer, it is important to understand the full benefits offered by this area of law.

First, the type of debts one has can significantly impact the decision of whether to file for bankruptcy. Family law obligations, such as alimony or child support, cannot be discharged. Some types of fines and taxes also will survive a bankruptcy. However, it is equally erroneous to believe that no taxes can be erased by a bankruptcy. Certain tax debts may be dischargeable if they are older than three years and relate to tax returns filed over two years before the date of the bankruptcy filing. The assessment date of the taxes must also precede the bankruptcy by over 240 days. 

After understanding what will and will not be discharged by a potential bankruptcy filing, an individual should also consider how he or she would start rebuilding credit after the completion of the bankruptcy process. As we discussed in last week’s blog entry, that process begins much sooner than individuals might think. In fact, if any credit accounts remain open, an individual could use them to accrue only small monthly debts that are paid off in full, thereby raising one’s credit score.

Finally, rest assured that many or even most people won’t know that you filed, save for your creditors. True, the legal proceeding is public. However, given the large number of filings every year, a bankruptcy is not very newsworthy. 

Related Article: “16 Myths About Bankruptcy,” copyright 2016, Goldman & Beslow, LLC,

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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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