I hear this a lot from people here in New Jersey that I talk to about bankruptcy: “A friend told me that . . . . “ or “I read on the Internet that . ." There are a lot of myths and misconceptions out there about bankruptcy, and the sad thing is, they are keeping people from doing the one thing that can really help them. Well, welcome to Bankruptcy Mythbusters!
There are four myths that I hear about the most, and here they are:
The chances are great that this is not true. Most people that come to me already have bad credit, and bankruptcy would just be a blip on the radar. Check all three of your credit scores and find out for sure.
If your scores are high because you look good on paper, but can’t keep up the pace of all the credit card payments, then filing will hurt your scores. But then again, something has to give anyway, and will get better in time. Which leads me to the second myth.
Sometimes I hear 10 years, but the idea is the same. The length of time that filing will affect you is not absolute and fades over time. There are ways to rebuild your credit and improve your scores that usually pay dividends in 2-3 years. Wiping the slate clean now will get you back on track faster than letting the debt continue to weigh you down.
The corollary to this is that you can’t file bankruptcy if you own your home. Here in New Jersey, this is not an absolute. If you are “upside down” on your mortgage or have very little equity, then exemptions should protect you.
It is only people who own their homes outright or have significant equity that need to be concerned. The best thing to do is to have a bankruptcy attorney do a liquidation analysis to be sure.
Although this may be true in some cases (and only in relation to a chapter 7), most folks in Southern New Jersey do not have a high enough household income to be an issue.
It might be the case that your net household income exceeds your living expenses (not including payments on credit cards or other antecedent debt) by enough that a chapter 13 repayment plan might be better for you, but that does not mean that you can’t file bankruptcy at all.
So What Do I Do?
Don’t let the myths hold you back! Find out the truth about bankruptcy by getting my free book, Top Questions People Ask About Filing Bankruptcy in New Jersey.
If you live in South Jersey and are considering filing bankruptcy, call my office at 856-432-4113 or contact me through this site for a free consultation in my Woodbury office to discuss your case.