Bankruptcy is probably one of the three most common legal procedures an NYC resident will ever go through. The other two are divorce, and estate matters.
It’s also one of the most misunderstood legal proceedings. Myths abound, and those myths can get people into a lot of trouble.
The way you handle your finances before bankruptcy doesn’t matter.
There are a lot of perfectly innocent mistakes people make with their finances prior to filing for bankruptcy that can create severe case complications later. Often, they’re trying to do everything in their power to avoid filing, never realizing they may be giving the appearance of creditor favoritism or attempted fraud.
They may also make money available to creditors that wouldn’t have been available before they started taking action.
For example, withdrawing money from your retirement account to pay creditors just before filing for bankruptcy looks like favoritism to bankruptcy trustees. It’s also wholly unnecessary. Unless they are funds in excess of a $1,245,475 cap, retirement funds are hard to touch…until you withdraw them. After that, they become fair game.
Other bad moves include transferring property out of your name, running up your charge card for anything other than utilities or groceries, and taking out large cash advances totalling $950 or more 70 days prior to filing.
Bankruptcy means giving up all your property and starting over from scratch.
You may not have to give up any property.
A great deal of property is exempt in a Chapter 7 bankruptcy. Anything that falls outside the exemptions may be taken and passed on to creditors, but you’ll find you get to keep a lot more than you would have suspected.
Some people don’t have any property that isn’t exempt.
If you file a Chapter 13 case you don’t lose any property at all. You enter into a payment plan. When the payment plan is complete, you receive a bankruptcy discharge.
Bankruptcy will get you fired.
It is against the law for an employer to fire you just because you filed for bankruptcy. Your employer also may not reduce your hours, reduce your salary, or demote you on the basis of a bankruptcy.
Government entities may not deny you a job over it. You may not be denied a professional license on the basis of a bankruptcy, either.
You can be denied a new job or a security clearance on the basis of a past bankruptcy. But being denied security clearance is less likely, as the bankruptcy will eliminate any debts you may be blackmailed over.
Bankruptcy means never getting credit ever again, or not getting credit for years.
You’ll probably start getting credit offers a week after your discharge. Most often you’ll see credit card offers and car loans.
While the interest rates on these offers will be high and while you might not want to jump right back into the world of credit right away, this fact does demonstrate creditors are perfectly willing to issue credit again. In fact, they’re even more motivated to do so. Because it will be years before you can file for bankruptcy again, they’re reasonably assured they can get their money.
Within two years you can even take out a house loan.
Bankruptcy will ruin your credit report.
Your credit score is likely to go up after bankruptcy. You’re wiping out dozens of collection items and past due payments. Your debt balance is restored to zero. You won’t have a 720 credit score out the gate, but with time and work, you can.
You wouldn’t even be the first.
Bankruptcy is for scammers and deadbeats.
Bankruptcy is for anyone who has gotten in over his or her head financially. It is a law built into the system to account for the risks of a capitalist system. You can do almost everything right and still end up with an unforeseen circumstance that makes filing for bankruptcy a good idea.
Experts will even tell you not to wait. Once you know you need to file, do so.
Bankruptcy is really expensive.
Bankruptcy costs less than your debts do. It costs less than losing your house or your car. And it costs less than the physical and mental toll of overwhelming debt.
Bankruptcy is something you can file on your own.
Bankruptcy is a complex legal matter which requires an attorney’s help. Less than 1% of Chapter 13 cases make it to discharge when the debtor chooses to represent himself or herself. The figures for Chapter 7 bankruptcy are better, but still dismal.
If you don’t want to waste money or accidentally take an action which could land you in hot water, call our offices for your free consultation. We’re here to navigate you through the bankruptcy process so there are no unpleasant surprises.