Here are some common bankruptcy myths. We encourage you to reference them before, during and after your bankruptcy. For more specific questions, please contact one of our experienced New Jersey bankruptcy lawyers at 856.429.2449 or lperlman@newjerseybankruptcy.com.
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MYTH #1:
People who file bankruptcy lose all their property.
FACT:
Most debtors do not lose any property. The majority of all cases are administered as “No Asset” cases, meaning there are no assets that are both non-exempt and worth enough for the estate to pay the costs of administration. If you do have a large tax refund or other non-exempt asset that may be at risk, your attorney can advise you how to best protect it.
MYTH #2:
People who file bankruptcy never get credit again.
FACT:
Many of our clients receive offers for credit before their bankruptcy is even finished. We have had many clients who purchase homes within two years of their bankruptcy. Our firm also has a Credit Reporting Coordinator on staff to help make sure our clients’ credit reports are as accurate and up-to-date as possible enabling them to maximize their credit scores.
MYTH #3:
Only deadbeats file bankruptcy.
FACT:
From experience, I can tell you that our clients are in bankruptcy due to job loss, illness, divorce and other economic crisis that are often not in their control. Most debtors would do anything they can to avoid filing bankruptcy and many have already taken out second mortgages on their homes in an attempt to catch up. They often simply cannot make end meet due to high interest and late fees.
MYTH #4:
Banks have lost a lot of money due to bankruptcy filings.
FACT:
Bank profits from credit cards are at an all time high of over $30 Billion a year. If banks were truly suffering from bankruptcy losses, they would start exercising prudence in lending instead of giving out credit cards like candy.
MYTH #5:
Bankruptcy “costs” each family an average of $400 a year.
FACT:
This figure assumes that debtors could pay their bills if they did not file bankruptcy. Banks know that debtors who need to file bankruptcy do not have the ability to repay. Even if they did not file bankruptcy, they would not be able to file their debts in full. Those profits would not be given back to other credit card users anyway, the banks would keep them.
MYTH #6:
There is a minimum amount of debt required to file bankruptcy.
FACT:
Theoretically you could file bankruptcy even if you only had $500 in debt. We have had clients with little or no income who have filed for amounts that would be very manageable for those with a higher income. Therefore, there is no minimum.
MYTH #7:
I am only required to list the debt I want to get rid of on my bankruptcy.
FACT:
All debts must be listed, but you can reaffirm debts such as your home, car(s) and other secured loans. You can also make voluntary payments to family or medical providers if you wish.
MYTH #8:
It is okay to charge up your credit cards just before you file bankruptcy.
FACT:
Debt acquired after you realize you are not able to repay may have to be paid back in full even if filing bankruptcy.
MYTH #9:
If you are married and file bankruptcy, your spouse must file too.
FACT:
Many married debtors file alone and the spouse is not affected. Unless both spouses are listed on the debt, a single filing often makes more sense.