Bankruptcy Myths

We work hard with our Long Island clients to dispel the fictional ideas that creditors spread regarding filing for bankruptcy. Many people, scared by the “myth” of bankruptcy, put up with creditor harassment far too long before seeking a bankruptcy attorney for debt relief.

It is important to seek legal advice when filing a New York bankruptcy case. Errors in the preparation of your petition or improper or imprudent advice can have a devastating effect on what you have worked your whole life to create.

It can be hard to discern fact from fiction when making the difficult decision to file a Chapter 7 or Chapter 13 bankruptcy case. Below are a few common misconceptions regarding bankruptcy filings and the fact behind the fiction.

MYTH: Filing for bankruptcy is the worst thing that I could ever do.

REALITY: Bankruptcy is NOT EVIL. If you are reading this now, you should be applauded. You are taking a positive step to regain control of your financial situation and plan for the future. You have acknowledged that a problem exists and you are taking action to address it. Life sometimes throws us curves that we never could have imagined. The bankruptcy laws have been designed to help people address their financial difficulties in an honest, straightforward manner.

MYTH: I will lose ALL of my property.

REALITY: Certain personal property is classified as exempt, meaning that you can keep it, even after receiving a debt discharge in bankruptcy. The property that can be claimed as exempt in bankruptcy varies from state of state.

MYTH: I will NEVER get credit again.

REALITY: You WILL get credit again. The bankruptcy laws are designed to provide you with a fresh financial start. Many of our bankruptcy clients that have been granted a discharge in bankruptcy have been able to obtain new credit in as little as 6-12 months.

MYTH: I will NEVER be able to purchase a home after I file for bankruptcy.

REALITY: Some lending institutions offer mortgage financing to individuals who have filed for bankruptcy within 1-2 years after receiving a discharge in bankruptcy. In most cases, you must first re-establish some other form of credit after bankruptcy, and maintain a good payment history.

MYTH: I will lose my job.

REALITY: It is a violation of Federal Labor laws for an employer to discriminate against an existing employee because they filed for bankruptcy.

MYTH: You can only file for bankruptcy once in your lifetime.

REALITY: You can file for Chapter 7 bankruptcy again as long as it has been at least eight (8) years since you received your last discharge. In addition, even if you have filed for Chapter 7 within the last eight (8) years, you may still be eligible to file for Chapter 13 – Contact our offices for more information.

MYTH: My bankruptcy will affect my spouse’s credit.

REALITY: When one spouse files for bankruptcy, as long as none of the debts scheduled by you are joint debts with your spouse, your spouse’s credit is generally not affected.

MYTH: I can pick and choose those debts that I want to discharge in bankruptcy.

REALITY: You are required to list all of your debts in your bankruptcy schedules, even those, such as mortgages, automobile loans and other secured debts that you may still continue to pay voluntarily, on a monthly basis, after bankruptcy. In addition, even if a debt is discharged, you still have the right to voluntarily repay any debt.

MYTH: I cannot discharge personal income taxes in a Bankruptcy.

REALITY: Some personal income tax liabilities may be discharged in either a Chapter 7 or Chapter 13, reorganization, proceeding. The criteria for discharge is complex and should be reviewed by an experienced bankruptcy attorney.

MYTH: The bankruptcy process is long and difficult.

REALITY: The typical Chapter 7 case takes approximately 4-5 months from the date that the petition is filed until the date that a discharge is issued by the Bankruptcy Court. The bankruptcy process, while complex and sometimes confusing to the average person, is a relatively straightforward process when you are working with an experienced bankruptcy attorney.

Contact my office today for your free consultation to help you get clear on what is myth and what is reality. As your Long Island bankruptcy attorney, the truth about bankruptcy is my daily business!