BANKRUPTCY CAN GIVE YOU A FRESH START
In the past, there was a heavy stigma associated with bankruptcy. Today, however, it is viewed as a means of obtaining a fresh financial start after life takes an unexpected turn. Being in deep debt is often the result of events we have no control over, such as job loss, divorce, illness, death of a family member or business failure. These can happen to anyone.
I believe in second chances, and I know that a person does not think seriously about filing bankruptcy until they have exhausted all other options. Most of us want to pay our bills, but sometimes that’s impossible with so much debt hanging over us. This is why the bankruptcy laws were created.
Bankruptcy is a lot easier than some people realize, but filing is more complicated than in the past. More than ever, you need someone on your side who knows how to do the job. I’ve worked in bankruptcy for over 20 years and that experience can help guide you through the often complicated bureaucracy.
Types of Bankruptcy:
The cleanest, most complete, immediate type of bankruptcy is a Chapter 7 in which debts are eliminated. If you are paying on a house or car or both, depending on how much that collateral is worth, you may be able to continue to pay on it and keep it. The law says that a person cannot file a Chapter 7 bankruptcy if that person earns over a certain amount of money; that amount changes from time to time and your lawyer will know those limits. The entire bankruptcy process takes about four or five months in New York.
Another kind of bankruptcy available for an individual is a Chapter 13 where you pay your debts off a part at a time. During the time you are paying these debts, the creditor cannot take your house or car or anything else. This kind can last up to five years. People often use Chapter 13 to let them catch up on payments on a house or car. If a person earns over the amount allowed for filing a Chapter 7, he or she may be eligible for a Chapter 13.
Incidentally, these chapter numbers are just the sections in the bankruptcy statute.
BANKRUPTCY MYTHS
Myth #1: Only wasteful, lazy people file bankruptcy
Of course not. Most of us work very hard to keep our debts paid, and then something happens out of our control, such as injury, layoff, or medical bills. We feel guilty even though it was not our fault.
For years, hundreds of thousands of people have found themselves in this kind of situation and have turned to bankruptcy for help. That’s what the law is for.
Myth #2: I will lose my house and car
Not necessarily. You might give up either or both if the cost of keeping them is too much, and sometimes the equity in the house is great enough that the Bankruptcy Trustee may want to use that for the creditors. You have to discuss this with your bankruptcy lawyer, but you do not automatically lose either just because of the bankruptcy.
Myth #3: I will never be able to get credit again
Surprisingly, some businesses, after the bankruptcy is over, notice that you now have an income (if you do) but have no debt. So, they want to sign you up for credit again. You have to be careful, of course, as many credit card companies can be predatory, charging exorbitantly high interest rates.
Myth #4: I will never be able to buy a car or home after bankruptcy
Using your fresh start, you can look to buy either one or both, sometimes in only a few years after bankruptcy discharge, assuming you have a steady income and can afford the terms.
Myth #5: My wife or husband will be stuck with my debt
This is usually not the case, but each situation is different. A bankruptcy attorney can answer this after reviewing the specifics of your case.
Myth #6: A person cannot get credit for 10 years after filing bankruptcy
Not true. A bankruptcy will show up on your credit report for 10 years. But the bankruptcy itself does not prevent businesses that might want to give you credit from doing so. They are usually more concerned about unpaid debt, which, after a bankruptcy, won’t exist.
Myth #7: My employer will find out
Not necessarily. The Court is certainly not going to tell them. A person’s bankruptcy is a matter of public record, but very few people know how to find that information, including employers. There would also be little reason for anyone to try to find that record unless he was doing a background check.
Myth #8: I could lose my job over this
It is illegal to fire a person because of his or her filing bankruptcy. If an employer does fire you and you believe it is because of bankruptcy, you should talk to a lawyer about a wrongful termination lawsuit against your former employer.
Myth #9: I don’t need a lawyer for bankruptcy; I’ll just go see a “debt counselor” or a person who does loan reductions
Only a bankruptcy lawyer can take steps to eliminate the debt. Others might be able to help you set up a plan for repayment, but the problem with that approach is that while you are paying on such a plan, the creditors can still sue you and harass you. One important aspect of bankruptcy is that the Court orders all calls and harassment to stop.
Myth #10: I could go to jail over this
There are no debtors’ prisons. If you cheated on taxes or committed some kind of criminal fraud, you have a different situation related to that criminal act, but you would not go to jail just because of your debt obligation.
Don Frazier - Attorney at Law 