Wednesday, December 26, 2012

Personal Bankruptcy Myths

Time to talk about personal bankruptcy myths. As always, please don't take my word as gospel. Talk to a bankruptcy attorney about your own particular situation. Read my tips to help you find a bankruptcy attorney before you meet.

There is so much bad bankruptcy information on the web, that it needs to be debunked somewhat regularly. Here are some of the most common myths about bankruptcy:

1. The bankruptcy laws of 2005 made it nearly impossible to get a personal bankruptcy discharge. This is just not true. Yes, the laws changed in 2005 to help prevent bankruptcy fraud, but the vast majority of folks will still be able to get a fresh start, whether it's through a chapter 7 or a chapter 13 bankruptcy.
2. Bankruptcy will ruin your credit. Okay, this one isn't so much a myth as it is a ridiculous notion for many people. Of course, bankruptcy can ruin healthy credit. But, if you are considering bankruptcy, the chances are great that your credit is already is already bad....maybe really bad. Bankruptcy may actually improve your credit score.

3. You can't afford a bankruptcy lawyer. Yes, you can. Many lawyers will let you pay them off over time. Again, refer to my bankruptcy lawyer tips for more information.

4. If you pay off certain credit cards prior to filing, you can keep those cards open. Nope. It's highly unlikely that any creditor will keep your credit open once they catch wind of your bankruptcy, even if you don't owe them anything. What's more, if you make what is called a preferential payment to any one creditor in an effort to not include them in your creditor matrix, the trustee can actually go after that money if it's over a certain amount. What that means is that it can be retrieved and put back into your estate to be distributed differently than you had intended. 

5. You can run up the balances on your credit cards shortly before filing. DON'T EVEN THINK ABOUT IT! That is fraud, and you will get caught. There are guidelines between your last charges and when you should file. This is another reason you need to talk to an experienced attorney.

6. Your stuff is worth a lot. Well, it could be, I suppose. But most people value their belongings unrealistically.  Your two year old couch is not worth what you paid for it. It is worth considerably less. Why is this important? Because your belongings will determine what your assets as a whole are worth, and that could make the difference between whether you can file a chapter 7, and in what you get to keep. It's possible for many people to keep everything they own (I did), and a lawyer can give you guidance on how to self-appraise your loot.

Those are some of the most common personal bankruptcy myths. There are more, and perhaps we'll get to them later. The point of this post is to not believe everything you read on the web about bankruptcy.  Find out how to get a free consultation with an attorney, and find out the straight dope for yourself. 

Wishing a fresh start to all in need,


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