Common Myths About Bankruptcy

Bankruptcy is not a decision that should be taken lightly

. However, in the world we live in today where there is rampant unemployment or under employment, more people than ever are filing for bankruptcy. This is one of those areas where a lot of people have pre conceived notions about it, then they make an appointment with a bankruptcy lawyer and find out that what they thought was not actually the truth.

One of the things that people do not understand about filing bankruptcy is the income requirements. A lot of people do not think this is an option for them because they make too much money. There is actually a standard test that is conducted on your income called the "means test". Your attorney will compare your income to the average income levels for your state for a household of the same size. If your income is over this mark, it does not make you ineligible; it just means you will need to look at a Chapter 13 instead of a Chapter 7 bankruptcy.

Many people are also under the impression that if they file under the Chapter 13 laws, that they will still have to pay off their debts. This is not usually the case, although you may have to pay a portion of your debt for three to five years. There are a variety of factors that come into consideration here before the amount that you have to pay. The court will look at the total amount of debt that you have, how much of it is unsecured, how many other assets you have that are non-exempt and how much disposable income you have.

Another common mistake that people make when thinking about filing is that they will lose everything that they own. This is also not the truth. Most bankruptcies that are filed are called "no asset" cases. This is because the laws usually allow you keep certain assets that cannot be touched by your creditors. This usually includes your home, retirement accounts, pensions and your car, depending upon the value of the car. While most of your unsecured debt can be cleared through the process of filing, not all of your debt can be lumped into this mix. If you have any student loans, child support, alimony or fines that have been levied by the court, you will still be responsible for those debts.

Another common myth is that if you file, you may think your credit will be ruined. While having a bankruptcy in your records certainly is not a positive thing, the reality is that by the time most people get to the point of thinking about it, their credit is already ruined anyway. Filing for bankruptcy can start cutting your losses and start the clock ticking on how soon it will be removed from your records. If you continue to struggle with late payments in lieu of filing bankruptcy that clock never starts ticking. Filing bankruptcy can give you the fresh start that you need.

by: Stewart Wrighter

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