Bankruptcy Myths

Myth 1: I will never get credit again.

FALSE: My experience, since 1980, in either good or bad economic times, is that people start to get credit again one to two years following a bankruptcy filing. This is true, even though the bankruptcy remains on your credit for a longer period of time. I have represented people buying or refinancing a home or buying a business, with credit, in this time frame, after a bankruptcy. Credit givers focus on the core factors of steady employment, some savings and timely payment of bills.

Myth 2: If I own a home or car I cannot file bankruptcy (or, I will not be able to keep home or car).

FALSE: There are different bankruptcy choices. There is always one in which you can keep major assets, such as a home and car. Although there are several factors to consider, the most important question is whether you can afford to make the payments. Just as important, you are not locked in to a home or car. Sometimes, it is better to give up the home and car and the bankruptcy laws allow you to do so without penalty.

Myth 3: If I am relieved of my debts, I will have to pay income taxes on "forgiven" or "cancelled" debt.

FALSE: In bankruptcy, debts are "discharged", not forgiven or canceled. These words are legal "terms of art" which have very different legal meanings. Discharged debts are not subject to income tax.

Myth 4: A married couple both have to file.

FALSE: Bankruptcy relief is individual. Married couples may file jointly, and therefore, save on legal fees and filing fees, but it is not required. I always analyze whether only one spouse has to file and the impact on the other spouse, if any. Many times, it enhances the fresh start if only one spouse has to file.

Myth 5: Our credit cards are "joint", so we both have to file.

USUALLY FALSE: Credit cards are marketed individually. Just because a spouse, child or other person may have a courtesy or second card, does not make the account a joint account. I will explain the "ins and outs" of this concept in our consultation.

Myth 6: I will not be able to get a job or a new apartment because of a bankruptcy.

FALSE: The Bankruptcy Code expressly prohibits job discrimination due to bankruptcy. I have represented stock, bond and futures traders, who all deal with substantial sums of money, and they have been gainfully employed after bankruptcy. It is true that some institutional landlords run credit checks on prospective tenants, and may raise an issue. However, I can discuss with you how to handle this situation. I have had many clients who have had to move, during or shortly after filing, but I have never had a client tell me he or she was homeless.

Myth 7: I have been sued (or a judgment has been entered), so I cannot get relief from that debt.

FALSE: There is no "race to the courthouse". A bankruptcy filing stops all actions by those you owe money to from continuing those actions, no matter what stage of proceedings they are at. With very few exceptions, all lawsuits are stopped immediately upon filing and that particular debt will be treated like any other similar kind of debt. Even if a bank account has been frozen or wages are about to be, or are under, a garnish, that will stop and you may even get your money back.

To learn more about how bankruptcy can eliminate your debt, contact Nathan Horowitz, Esq, online or call 800-592-3020. I offer flexible scheduling, with offices in White Plains and Carmel, New York.

The law practice of Nathan Horowitz, Esq, is recognized by federal law as a debt relief agency. I help people file for bankruptcy relief under the Bankruptcy Code.