Dispelling Bankruptcy Myths
Nov. 18, 2022
Dealing with bankruptcy is a stressful and confusing situation. With so many myths and misconceptions about bankruptcy, it can be hard to spot the truth. At Schwartz, Hanna, Olsen, & Taus, P.C., we strive to clear up misconceptions about bankruptcy to our clients in Middlesex County, New Jersey. We help our clients see their options so they can make informed decisions, so reach out to us with any questions you have.
Common Bankruptcy Myths
When questioning whether bankruptcy is right for you, it’s important to be able to understand what is true and not true about bankruptcy. Some of those most common misconceptions include the following:
Bankruptcy permanently ruins your credit score.
While bankruptcy negatively affects your credit score, this is generally only temporary. Generally speaking, most folks see their credit score recover in about 12 to 18 months after filing for bankruptcy. However, bankruptcy filings stay on a credit report for 7 years.
Bankruptcy discharges all debts.
Bankruptcy does not automatically waive all debts. Bankruptcy filings specify the debts which will be discharged. For instance, credit card debts may be discharged, but the individual is still liable for their mortgage.
Bankruptcy means losing all possessions.
It is quite the opposite. Filing for bankruptcy protects people’s assets. Nevertheless, the court may allow creditors to seize property, such as repossessing vehicles or homes.
Both spouses must file for bankruptcy together.
It is not necessary for spouses to file for bankruptcy together. However, the filing party must include their spouse’s assets in the filing. It makes sense to file together when more debts can be discharged in the filing. When one spouse files for bankruptcy, it may allow the other to keep a good credit score.
Bankruptcy can only be filed once.
The law permits individuals to file for bankruptcy more than once. However, the filing party must prove to the court the specific circumstance that led to a second or third bankruptcy filing. Otherwise, the court may allow creditors to seize personal assets to cover part of the debt before discharging the rest.
Debt consolidation is better than filing for bankruptcy.
Debt consolidation consists of using one credit line to pay for multiple outstanding credits. Debt consolidation makes sense when the single payment of the new credit is lower than the combined payments of all outstanding credits. Plus, the new credit comes with a lower interest rate despite a longer term.
Please note that debt consolidation may not be a good idea when an individual cannot cover payments. As a result, debt consolidation will only take the person deeper into debt. At that point, it is best to file for bankruptcy to discharge as many debts as possible.
Filing for bankruptcy stops creditor harassment.
Unfortunately, filing for bankruptcy does not stop creditors from calling, sending messages, or visiting debtors. Please remember that once a debt is discharged, creditors no longer have a claim on the debt. At that point, debtors may file a complaint against the creditor.
Filing for bankruptcy is a sign of failure.
There are many reasons why people file for bankruptcy. While some file for bankruptcy due to financial mismanagement, many others file due to circumstances beyond their control. Unemployment, the death of a loved one, medical bills, and personal injury are some of the most common causes of bankruptcy.
Finding the Right Bankruptcy Attorney in New Jersey
If you’re located in Middlesex, New Jersey, or the surrounding areas of Somerset County, Morris County, Passaic County, Essex County, Bergen County, or anywhere else in the state, contact Schwartz, Hanna, Olsen, & Taus, P.C. We strive to deliver our best effort to help our clients find financial relief.
The sooner you reach out, the sooner you’ll arrive at financial independence once again. Get the help you need to find debt relief. We are on standby to take your call.