Top 10 Misconceptions about Bankruptcy

By Kelly M. Resnick, Managing Attorney, Resnick Law Offices, Bay Area

TOP 10 MISCONCEPTIONS ABOUT BANKRUPTCY

  1. Bankruptcy means the end of your financial life and never getting credit again.
    • Not true!  Before long you will get credit card offers again.  You may have to pay higher interest rates and have lower limits.
  2. You can not eliminate tax debt in a bankruptcy.
    • It depends on when you incurred the debt and what efforts the IRS has taken to collect.  It is difficult to wipe out taxes, but not impossible!
  3. You lose everything you own when you file bankruptcy, including my retirement.
    • The whole idea of bankruptcy is to give you a fresh start.  If you lose everything, that’s not giving you anything to start with.  The “exemption” system helps protect certain assets from your creditors, including your car, your home and in most cases, 100% of retirement accounts!
  4. I can keep the credit cards with zero balances open even after I file bankruptcy.
    • It depends.  Today, creditors have electronic links to your credit report and receive alerts when anything major happens, including bankruptcy.
  5. I’m married, so both spouses must file.
    • Not necessarily.  If one spouse has significant debt in his or her name only, he or she may file without the other spouse; however, this is risky in a community property state such as CA.
  6. Only “deadbeats” file for bankruptcy.
    • Most people file bankruptcy after a life-changing experience, i.e. loss of job, serious illness, or divorce.
  7. I should not include certain creditors in my filing because it’s important to me to pay them back.
    • Although commendable, Bankruptcy law is “all or nothing,” so you must include all your creditors in your case.
  8. I should pay my friends and family members back before filing bankruptcy so they are not wiped out in the bankruptcy.
    • Doing this could prevent you from filing bankruptcy for 1 year! All creditors, no matter family or Visa, are seen as equals in the Court’s eyes.
  9. I can max out all my credit cards, then file for bankruptcy and never have to pay for the things I bought.
    • Not a good idea.  It’s called fraud and bankruptcy judges frown upon this conduct.
  10. Everyone will know I’ve filed for bankruptcy, even my employer.
    • Yes, all bankruptcy filings are public record.  But, unless you are a famous or prominent person and the media has an interest in your filing, probably the only people who will know are your creditors.

Don’t let incorrect information deprive you of your fresh start!  If you are struggling with any type of debt, we can help!  Call 510-860-3688 for a free consultation and get back on the road to financial success today!!

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About Kelly

As the Managing Attorney at Resnick Law Offices, I work with clients one-on-one to create a personalized debt solution strategy. We represent clients in all areas of financial distress - Bankruptcy, Debt Settlement, Tax Debt Negotiation, Short Sale. It's never too late to get back on the road to financial success! We offer free 1 hour consultations for all new clients and offer affordable, competitive rates because we believe debt relief should be affordable for everyone! Feel free to email me directly with any inquiries: Kelly@ResnickLawOffices.com
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