In Part I of our Bankruptcy Myths blog post installment, we covered the first three false statements regarding bankruptcy:
Myth #1- Bankruptcy ruins your credit for 10 years.
Myth #2- People who file for bankruptcy are bad with money.
Myth #3- Bankruptcy will prevent you from ever getting credit again.
This time we will cover the remaining misconceptions out there involving bankruptcy and the people who file for it. If you are experiencing tough financial times and are wondering if bankruptcy is an option for you, we can help. Contact Brooklyn bankruptcy attorney Michael F. Kanzer & Associates, PC for a free consultation at 718.769.7200.
We separate the myths from the facts in this post.
Myth #4: After filing for bankruptcy, you will never be able to own anything again.
This is a myth because it’s possible for people who file bankruptcy to own whatever items they want after the process has been completed. Surprisingly, many extremely wealthy people amassed their fortunes after bankruptcy.
Myth #5: The debtor loses everything they own when they file for bankruptcy.
Many bankrupt individuals are able to hold onto their possessions, die to the fact that exemptions provide for assets that the debtor can keep and some assets, like pensions, are beyond the reach of bankruptcy trustees and creditors. In the case of a chapter 13 reorganization, the individual is allowed to keep assets assets while paying off as much debt as they can reasonably afford.
Myth #6: You can run up your credit cards before declaring bankruptcy and not be responsible for paying that money back.
FALSE. Further maxing out your cards up until the moment you file is considered fraud; debt that’s incurred as a result of fraud is not discharged.
Myth #7: Bankruptcy discharges all past debts.
Bankruptcy isn’t always the fresh start those who file think it is. Multiple kinds of debt are not absolved by bankruptcy. Any domestic support obligations, such as alimony or child support, aren’t eligible for removal under any conditions. In addition, if you are required to pay restitution due to a crime, that debt can’t be removed either.
In the past, when creditors were considered more “fair” and banking practices were better regulated, filing for bankruptcy was sometimes looked upon as being a “personal failure,” or even a “character flaw” for having poor financial management skills. These labels and attributions are no longer valid today, if they even ever were in the first place.