Bankruptcy Myths

Bankruptcy Is Not the End of the World; It's the Beginning of a New One

There are a lot of myths about bankruptcy floating around out there. While some of them may be based in truth, most of them are incorrect. Bankruptcy is a legal method of discharging your debt and getting a fresh start in your financial life. It is time to dispel some of these myths. Learning these debt management facts and basics may help you feel more comfortable about filing for bankruptcy.

"I'll Lose Everything I Have"

This is probably the most prevalent myth, and the one that is least accurate. It is not in the government's best interest to take away all of your property and assets. That would mean you would have to apply for government assistance programs to survive. That is the last thing the government wants.

Instead, you are allowed to keep much or all of your current property and assets, including your car, your house and your retirement accounts, depending on how much they are worth and which type of bankruptcy you file. These are called bankruptcy exemptions. Talk to our New Jersey bankruptcy attorneys to learn how much you will be able to keep. It may surprise you.

"I'll Never Get Credit Again"

The opposite is true. You can rebuild your credit quickly if you stay on top of your bills and are diligent about your finances. There really is life after bankruptcy, especially when it comes to credit. Many people are able to qualify for a VA or FHA home loan within a year of their bankruptcy discharge. Credit card offers will still flow in to your mailbox and lots of people get auto loans at good interest rates within a few months of bankruptcy. The most important factor in rebuilding your credit is to pay your bills on time. This shows you have the ability to remain fiscally stable.

All Debts Are Wiped Out by Chapter 7 Bankruptcy

No. Child support and spousal support (alimony) cannot be eliminated by bankruptcy, nor can school loans. Any money you owe as restitution for a crime or that you are paying back because you obtained it by fraud is also ineligible for discharge. If you owe back taxes, you may be able to eliminate taxes owed for more than three years. However, you must have filed a tax return for this to be possible.

Filing for Bankruptcy Hurts Your Credit, and That Lasts for 10 Years

If you have to file for bankruptcy, it is likely that your credit is already in tatters. The only part of this myth that is vaguely true is the part about 10 years. A bankruptcy will remain on your credit report for 10 years. However it will not hurt your credit. Instead, it is more likely to show that you have become fiscally responsible and used the second chance you were given to improve. This is especially true if you pay all of your bills on time and avoid running up your credit cards.

"Creditors Will Still Call to Harass Me."

Once you have filed for bankruptcy, an automatic stay is put in place to prevent this. In fact, it is illegal for creditors to contact you in any way, shape or form after you have filed for bankruptcy. They can face very severe penalties if they do so.

To see more myths about bankruptcy, visit our article on the subject. To learn more about how bankruptcy can help you get out from under your burden of debt, call our experienced bankruptcy lawyers with offices in Paterson, Jersey City and East Orange today to find the solutions to your financial problems. Call for a free consultation at 973-414-8069 or 888-827-5493.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.