Many people think that a person who files bankruptcy is somebody who couldn’t control their spending. While this may be true in a very small percentage of the filings, most Chapter 7 or Chapter 13 cases are filed due to circumstances that were beyone their control. For example, loss of a job, divorce or serious health issues.
Other misconceptions surround bankruptcy. Below are a few of the most common:
If you file bankruptcy, you are financially irresponsible.
There are always people out there that will take advantage of the system, but the majority of debtors have experienced unexpected negative financial events. By filing for bankruptcy protection, the individual is taking charge of their financial situation and trying to recover from a life event that set them back financially.
All of your debts are eliminated in bankruptcy.
While it is true that most debts can be discharged in your bankrutpcy filing, not all of them will be eliminated. For example, if you have been ordered by a court to make alimony or child support payments, you cannot discharge these debts. For other examples of debts that are not eligible to be discharged, please read our blog titled “Discharging Debt in New Jersey.”
You can spend freely and discharge any debts incurred leading up to your filing.
The law prevents a debtor from eliminating debts that were incurred with the intent to discharge them in bankruptcy. In fact, going out and maxing out your credit cards in the days leading up to your bankruptcy filing is considered fraud.
Bankruptcy permanently destroys your credit.
When you file a personal bankruptcy, it will damage your credit score. However, most debtors are pleasantly surprised at how quickly they are able to qualify for a credit card again. If a debtor works hard to make timely payments on all of his or her post-bankruptcy bills, his or her credit score will start to improve quickly. Also, it is important that you check your credit report to verify that all of the discharged debts are accurately reflected on the report as being discharged.
Bankruptcy fixes all your financial problems.
You shouldn’t expect your bankruptcy filing to be a cure-all. When you emerge from your case, you will have less debt but you also have a lot of work ahead of you to improve your credit score. You must learn from any past financial mistakes and commit to protecting your fresh start.
If you are interested in learning more about filing a personal bankruptcy and how it could benefit you, please contact Levitt & Slafkes, P.C. to schedule an appointment. We are experienced in handling a variety of bankruptcy issues. Our offices are conveniently located in Maplewood, New Jersey. Please call us at 973-323-2953 or online to schedule your free initial consultation today.