Common Bankruptcy Myths Dispelled

1. MY BILLS MUST BE DELINQUENT, THE CREDITORS MUST BE CALLING, AND I MUST BE BROKE TO FILE BANKRUPTCY.

This is FALSE. If your bills are beginning to create anxiety and you see that you will not have the ability to pay them in the future, you do not have to wait until it is you are seriously delinquent and the creditors are chomping at your ankles. With a proper consultation with a bankruptcy attorney and good planning, you can avoid the stress of the lawsuits, judgments and wage garnishments that creditors will use to collect. You will also be able to protect your assets and avoid liquidating them trying to pay your bills.

2. I WILL LOSE MY HOME IF I FILE BANKRUPTCY.

This is FALSE. If you have a mortgage in place and can afford to pay that mortgage, there is no reason the bank will try to take your home. If you have equity in your home in excess of the mortgage, each state has different levels of protection for homes. New Jersey doesn’t have a state exemption but you can elect the federal exemption which is $20,200 of equity per homeowner ($40,400 of equity for married couples).

3. MY CREDIT WILL BE RUINED IF I FILE FOR BANKRUPTCY AND MY CREDIT SCORE WILL PLUMMET.

This is FALSE. If you are in a late on your bills or have your credit cards maxed out, your credit score probably has already been dragged down significantly. The exact measure of a credit score is unknown, but just having too much credit outstanding (your debt to credit ratio) even if current can reduce your credit score.

In fact, after a bankruptcy discharge you are a much better credit risk than just about anyone else, creditors will consider the following:

  • You have a clean financial slate.
  • You most likely have little or no remaining unsecured debt
  • You have just completed two course –one on credit counseling and the second on financial management
  • You have just put together a household budget and have used the bankruptcy process to strip the unaffordable debt from your budget
  • You understand clearly the implications of poor credit management
  • You can’t file another Chapter 7 for 8 years

 

4. EMPLOYERS WON’T HIRE ME AND I WON’T BE ABLE TO RENT AN APARTMENT IF I FILE BANKRUPTCY.

This is FALSE. Employers do not like to have employees that will be distracted by creditors and their collection tactics at the workplace or at home, because then the employee is unfocused and anxious about their financial situation. Neither does the employer want to deal with the extra accounting caused by wage executions. Furthermore, landlords prefer tenants who can use their salary to pay rent, not those paying creditors instead.

5. IF I KNOW I AM GOING TO FILE BANKRUPTCY, I MIGHT AS WELL MAX OUT MY CREDIT CARDS.

This is FALSE. Recent large purchases of more than $550 for luxury goods bought within 90 days of filing and cash advances of $825 within 70 days of filing will stick with you and won’t be discharged. This type of activity could result in criminal charges against you. Maxing out those cards will only create more problems in your bankruptcy filing and may lead to a dismissal of your case. Bankruptcy is not meant as a way to deceive the creditors and instead for the debtor who is trying to get a fresh start.

6. I SHOULD DO EVERYTHING I CAN TO AVOID BANKRUPTCY; INCLUDING LIQUIDATING ASSETS AND CASHING IN MY 401K OR OTHER RETIREMENT FUNDS.

This is FALSE. Retirement funds are one of the untouchables, meaning they are protected in bankruptcy. If you decide to draw upon your retirement funds prematurely to pay creditors you will face taxes and penalties on those retirement withdrawals, by the IRS, if not repaid. You should consult with a bankruptcy attorney for a consultation to see what assets of yours will and can be protected in a bankruptcy filing.

7. MY IMMIGRATION STATUS WILL BE AFFECTED AND I WILL NOT BE CONSIDERED FOR CITIZENSHIP.

This is FALSE. Filing bankruptcy is NOT a crime and will NOT affect your Green Card or application for citizenship.

8. MY FAMILY, NEIGHBORS AND EVERYONE WILL KNOW THAT I FILED FOR BANKRUPTCY, THERE IS NO PRIVACY!

This is FALSE. Although the U.S. Bankruptcy Court records are public aside from someone really looking for your records, people are not concerned enough to uncover your bankruptcy. Over 2 million people filed for bankruptcy in 2005 and 2009 is looking to be close. In these tough economic times you probably know someone who has filed for bankruptcy and just don’t know it.

Here are some people that filed bankruptcy in the past and you probably never knew

  • Abraham Lincoln (16th President of the United States)
  • Walt Disney (Oscar – winning film producer, animation & theme park pioneer (1923))
  • Donald Trump (Billionaire entrepreneur)

9. THOSE DEBT MANAGEMENT PLANS ADVERTISED ON TV AND RADIO REALLY WORK!

This is FALSE. Remember that these companies are only middlemen and even though you pay the credit counseling agency, your relationship is still with your creditors. These companies rely on employees to get payments in on time; they make mistakes, prompting more fees and penalties by the creditors. Most people are vulnerable to a positive outlook by these debt counselors about their finances. Unfortunately there are not always truthful and things don’t always get better. Check out this post about Debt Management Plans.

10. I WILL HAVE TO PAY ALL MY CREDITORS BACK SOME DAY, SO WHY FILE BANKRUPTCY?

This is FALSE. In A Chapter 7 case, debts are discharged (wiped-out) except certain taxes, child support/alimony and student loans, for example. In Chapter 13, you pay according to what you can afford over a period of time. If you are saving house, most of your payments will be going to that prearrange.

11. I HAVE FAILED IF I FILE FOR BANKRUPTCY.

This is FALSE. There’s more than meets the eye with bankruptcy. Empirical evidence shows that bankruptcies are generally caused BY HEALTH PROBLEMS (excessive medical bills), INCOME LOSS (loss of employment) and FAMILY PROBLEMS. These are nearly the same things that cause foreclosures, divorce and many other of the problems we face in life.

12. I CAN’T AFFORD TO FILE BANKRUPTCY.

This is FALSE. You can’t afford not to file bankruptcy in some cases. As previously mentioned, even Donald Trump has been involved with corporations that have filed bankruptcy. Smart and business savvy people file to save themselves from a TOTAL loss. Spending what may seem like a lot of money today can save you much more in the future. Most bankruptcy attorneys have payment plans. A consumer bankruptcy attorney will show you how to free up money in your budget to allow you to pay the fees to file the case. In Chapter 13 part of the fees can be paid through the budget plan.

There is no magic formula for deciding when bankruptcy is the right choice. It is an option you might consider if you:

  • Are paying only minimum amounts on your bills
  • Can’t budget yourself out of debt within five years
  • Are getting notices that your mortgage or loans are being foreclosed
  • Have had a severe financial setback, such as losing your job or a major client, a divorce or a costly illness

Bankruptcy does not get rid of all debts. You are still responsible for:

  • Alimony
  • Child support
  • Most recent back taxes
  • Most student loans
  • Recent large purchases of more than $550 for luxury goods bought
    within 90 days of filing
  • Fines or penalties of government agencies
  • Fraudulent debts
  • Cash advances of $825 within 70 days of filing

As a consumer, you can file for bankruptcy in New Jersey under either:

  • Chapter 7 (Straight Bankruptcy) to wipe out all debts except those listed and get an immediate fresh start or
  • Chapter 13 (Wage Earner Bankruptcy) to set up a repayment plan to pay back your debts over several years’ time.

How long should I wait to contact an attorney after an Accident or Injury?

As soon as possible, call Riviere Advocacy Group LLC. Injury case consultations are always free of charge. When you are injured, whether it’s an auto accident, slip and fall, work related accident, or other injury matter insurance companies immediately begin to investigate, to build its defense and keep you from winning a recovery. If you wait longer than necessary to retain an attorney, it gives the insurance company more time to prepare a defense against your claim, one which can be protected and preserved with an attorney.

When the insurance company calls after I am injured, how do I respond?

Our firm strongly advises that you do not speak to anyone from the insurance company until you speak to an attorney at this firm or another of your choice. After contacting our firm, we will be able to advise properly to protect your claim. Statements made to the insurance companies are frequently used against you at a later date, and may have a negative impact on your recovery. The insurance company has investigators looking to gather information from you to prevent you from obtaining a recovery later in a lawsuit. Investigators may at first seem friendly and advise you that they are trying to help you after an accident. Don’t let the insurance company or its employees mislead you, it in many cases is trying to minimize the payout that it is responsible for in connection with your accident. Call our firm and let us protect the settlement that you may be entitled to collect.

The representative from the insurance company said that I don’t need an attorney. In fact they told me an attorney would only make matters worse. Is this true?

Always keep in mind that the insurance representative is exactly that, an insurance representative, there loyalty is not to you. It is to help the insurance company build there case and keep you from collecting money from the insurance company. So, don’t fall for the act when they are friendly and tell you its alright to talk with them, without first, seeking the advisement of an attorney. Obviously, insurance companies make more money when they are collecting premiums and not paying claims. Just let the insurance companies speak for themselves:

‘The bottom line is that insurance companies make money when they don’t pay claims,’ said Mary Beth Senkewicz, who resigned last year as a senior executive at the National Association of Insurance Commissioners. ‘They’ll do anything to avoid paying, because if they wait long enough, they know the policyholders will die.’

Don’t weaken your claim by making a statement or providing information that is beneficial to the insurance representative, claims specialist, or whomever you speak with at the insurance company. Get represented! Hire an attorney and get your claim on the right track to the recovery that you deserve. An attorney will be able to negotiate the best settlement for your case or take it trial if in your case it is necessary.

But attorneys are expensive and I cannot afford one.

You can’t afford not to have an attorney! More likely than not, your case will be taken on a contingency basis. Contingency means: if there is no recovery for your injuries or damages, then you are not required to pay anything. A contingency fee is a percentage of the money this firm recovers for you. This type of fee arrangement was put in place by the courts, so that all accident victims can retain an experienced attorney and help them fight the insurance companies lawyers and doctors. While the percentage can vary depending on the circumstances of the case, especially where minors are involved, the fee is usually about one third of the net recovery.

Can I go to my doctor or another one of my choice to treat my injuries?

In auto accident cases, your Personal Injury Protection otherwise commonly referred to as “PIP” covers your medical treatment. The insurance company cannot tell who what doctor to see; that choice remains yours. So you are free to choose your treating health care provider or doctor. In other kinds of injuries, such as ones involving your employer they may have the right to tell you which doctor you must see. Furthermore, in other types of injury cases you may have to choose a physicians depending on the type of health insurance you have. Our firm can review your set of circumstances and advise you in determining which route to take in seeking treatment.