In meeting with potential clients thinking about filing bankruptcy in New Jersey, they often tell me that they heard from a friend or colleague certain things about bankruptcy that are inaccurate or outright wrong. These people are well meaning, but these myths often discourage people from seeking the bankruptcy relief that they need.
Today I read an FAQ article on the web site CreditCards.com, “Will Bankruptcy Stop Wage Garnishment?” The author rightfully directs people to consider other options besides bankruptcy, characterizing it as the last resort that it is, but in the process repeats certain myths that unnecessarily discourage people from that option. The writer states,
“filing for bankruptcy can be devastating to your finances, your credit score and perhaps most important, your morale. By filing for bankruptcy, whether Chapter 7 or Chapter 13, you give away a lot of your control over your own money. Someone else makes decisions for you, including which creditors get paid first, if at all.”
Let’s break that down.
Filing for bankruptcy can be devastating to your finances.
This is one of those scary and general statements that can be hard to disprove. However, what are more devastating are wage executions, bank levies, and car repossessions that can happen to people in debt over their heads. Bankruptcy can actually help your finances.
For example, I met with someone recently who was behind on her mortgage because she was trying to pay her credit cards. Discharging that debt would help her pay her bills with the biggest priority, like mortgages, car loan/lease payments, or taxes.
The automatic stay in bankruptcy can give you the breather you need to step back and restructure your finances, either through the straight discharge in chapter 7 or a plan of repayment through a chapter 13.
Filing for bankruptcy can be devastating to your credit score.
Again, this depends on your situation. Some people I meet with are current on their credit card payments, but don’t know how much longer they can make the payments. These people may well have a higher score that could take quite a hit from bankruptcy, but if their current debt payments are unsustainable, that hit is inevitable.
Others come in with debt that has bee in default for months, if not more than a year. Chances are, their scores have already been devastated. If you already have bad credit, then this is not an issue. Check your scores!
Filing for bankruptcy can be devastating to your morale.
This is just the wrong way to look at it! People that come in to my office are under a lot of stress from unmanageable debt, harassment from creditors, and a feeling of hopelessness. When I tell them how bankruptcy can help them, they start to realize how their lives can be better, and their morale actually improves!
By filing for bankruptcy you give away a lot of control over your own money.
Roughly 19 out of 20 chapter 7 cases here in New Jersey result in a discharge of debt and the retention of assets through exemptions. You can keep your money and lose your debt. Sounds like a pretty good deal. In a chapter 13, yes, the bankruptcy code does make decisions about who gets paid first, and if at all.
But as I mentioned earlier, bankruptcy allows you to prioritize your debt. An arrearage in mortgage payments gets paid before credit cards. Certain debts that are non-dischargeable, like alimony, child support, and certain taxes, get paid before credit cards and medical bills. Plus, if there is debt that you want to pay back, such as a loan from a friend or family member, you can certainly pay that voluntarily when the bankruptcy is over.
So What Do I Do?
The bottom line here is that bankruptcy is a last resort. However, if it is your best option, none of these myths should stop you! If you are unsure about whether bankruptcy is right for you, and you live here in southern New Jersey, I might be able to be of assistance.
Just call me at 856-432-4113 or contact me through my web site to set up an appointment in my Woodbury office to find out!
If you are looking for more information about bankruptcy, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey.