Filing for bankruptcy is a serious financial decision. If you aren’t able to pay your bills, but you’re afraid to file bankruptcy, read on…
Myth 1. You’ll lose everything. Contrary to what you might have heard, by filing, you’re likely to keep a lot of your possessions. What assets may be exempt varies from state to state, so be sure to discuss exemptions with a knowledgeable bankruptcy lawyer.
Myth 2. Paying off your debts is a better option. If you can’t seem to make a dent in paying off your debts and they amount to approximately 50% or more of your annual income, then filing for bankruptcy may be the best option for you.
Myth 3. Filing for bankruptcy is a personal failing and everyone will know. Unfortunately, due to the economy and changes in medical coverage in recent years, more and more people are finding themselves in financial trouble, therefore there isn’t the stigma there may have been previously. In general, no one would know you’ve filed, unless you tell them.
Myth 4. Bankruptcy will ruin your financial future. Although you should expect to have limited access to credit and to pay higher interest rates for the next 7 to 10 years, while bankruptcy remains on your credit report, your credit score will likely improve after you file for bankruptcy. Additionally, you may have opportunities during this time to continue to rebuild and improve your credit.
Myth 5. Filing for bankruptcy will destroy my spouse’s credit rating. Consumer bankruptcy filing is personal to the individual filing it. As long as your spouse didn’t guarantee or co-sign for your credit cards or loans, his or her credit rating will not be affected by your filing. Creditors cannot go after your spouse for debts that are in your name solely. Conversely, a bankruptcy filing only results in the filer having their debts discharged; the spouse’s debts must still be paid.
Myth 6. If you have been SUED by a creditor it is TOO LATE to file for bankruptcy. Actually, generally speaking, you can expect the opposite, as filing bankruptcy will immediately stop a lawsuit, foreclosure, sheriff sale, levy and/or wage attachment.
Myth 7. All of the debtors’ debts will be relieved. While both Chapter 7 and 13 will provide you with relief from most forms of debt, there are still some exceptions, such as: recent tax obligations, child and/or spousal support, student loans and debts resulting from fraud you committed.
Myth 8. You should cash in your 401K or retirement plan before filing for bankruptcy. Retirement funds are exempt and protected in bankruptcy proceedings, as long as the money remains within the retirement account. If you decide to withdraw your retirement funds prematurely it could trigger a. serious income tax ramifications and b. jeopardize your financial future.
Myth 9. You can lose your job due to bankruptcy. Federal law (11 U.S.C. Sec. 525) prohibits any employer from discriminating against you because you filed bankruptcy.
Bankruptcy has given millions of hardworking Americans relief from financial stress and a fresh new start. By and large, bankruptcy can discharge debts from personal loans, credit cards and medical bills… So, now that you have a better understanding of what will, and won’t happen in the bankruptcy process, explore your options with an experienced bankruptcy attorney.
Feldman Law Offices PC
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Conveniently located in Allentown, PA. Serving the Greater Lehigh Valley area.