The Most Common Misperceptions about a Bankruptcy Filing

We live in the information age, but we also live in the disinformation age. Anyone can go on the Internet and start rumors about just about anything. Bankruptcy is no exception. Many false beliefs have become common misunderstandings. Here are some of the most prevalent myths about your ability to file for bankruptcy and the potential consequences:

  • The 2005 revisions to the bankruptcy laws essentially did away with personal bankruptcy filings—Not true! Under the 2005 changes you must now submit to a “means test” to qualify for protection under Chapter 7. The bankruptcy court will look at your income and expenses to determine whether you have the ability to pay something to your creditors creditors over a three-to-five year period. If the means test says you must file a Chapter 13, your personal bankruptcy option will be limited to Chapter 11 or Chapter 13 reorganization.
  • You can’t file for bankruptcy until you have exhausted all savings and other funds, including retirement assets—Not true! You don’t have to lose everything before you can qualify for protection under the bankruptcy laws. You may be limited to Chapter 13 reorganization, but simply filing will put the automatic stay in place, so that your creditors can no longer call, write or take legal action against you.
  • You will never be able to purchase anything on credit again—Not true! Though you will be limited in what is available for a period of time, the simple act of filing for bankruptcy can be a step in the direction of rebuilding your credit. Potential creditors and lenders are more interested in what you do after your bankruptcy filing. If you establish good habits and pay your bills on time, your credit scores will improve. Under the right circumstances, you may be eligible for a car loan or a mortgage within 24 months.
  • Your employer will find out and fire you—Not true! Discrimination in employment based solely on the fact that you filed for bankruptcy protection is not permitted by bankruptcy law.
  • If you file for bankruptcy, you will lose all your property—Not true! Under state and federal bankruptcy laws, you have the right to claim a certain amount of real and personal property as exempt from sale in a bankruptcy proceeding.

Contact John Hargrave & Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.