by: Jonathan Goldsmith Cohen
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Top 10 NJ Bankruptcy Myths Debunked
1. Bankruptcy Myth or Reality? Myth: All debts are wiped out in Chapter 7 Bankruptcy. Reality: Not quite but most debt can be wiped out. What cannot be discharged in bankruptcy? Child support and alimony, student loans, restitution for a criminal act, and debts incurred as the result of fraud.
2. Bankruptcy Myth or Reality? Myth: Everyone will know that I have filed for bankruptcy. Reality: No! Your friends, neighbors, relatives, and employer will not know that you have filed for bankruptcy unless you tell them. Bankruptcy filings are not published in the newspaper.
3. Bankruptcy Myth or Reality? Myth: I will lose everything that I have. Reality: No! Do you know how many of our clients think that they will lose their house and car if they file for bankruptcy? This myth keeps people who really should file for bankruptcy from doing it. They think the government will sell everything they have and they will have nothing to start over with. In New Jersey, exemptions protect your assets such as your house, car, money in qualified retirement plans, household goods, and clothing. Most people get through bankruptcy and keep everything they have. If you have a mortgage or a car loan, you can keep the property as long as you keep making payments (like the rest of us).
4. Bankruptcy Myth: I can max out all of my credit cards right now, then file bankruptcy and never pay for the things I bought. Reality: That’s called fraud. Bankruptcy judges get quite upset about it. And who wants to wind up behind bars for bankruptcy fraud like reality TV stars Theresa and Joe Giudice.
5. Bankruptcy Myth: You cannot wipe out back taxes through bankruptcy. Reality: Generally speaking, this is true. However, under certain circumstances, taxes can be discharged in bankruptcy.
6. Bankruptcy Myth: Only deadbeats file for bankruptcy. Reality: Most people file for bankruptcy after a life-changing experience, such as a divorce, the loss of a job, or a serious illness. They’ve struggled to pay their bills for months and just keep falling behind.
7. Bankruptcy Myth: I will not qualify for bankruptcy because I am employed. Reality: Wrong! You can have steady income and still receive forgiveness on your debts through bankruptcy.
8. Bankruptcy Myth: I do not want to include certain creditors in my filing. It is important that I pay them back. Reality: All creditors must be listed on your bankruptcy petition. You have no obligation to pay back your creditors but if you have a moral obligation to do so, you can after you are back on your feet. If your conscience won’t let you sleep because you didn’t pay your debts, there’s nothing in the bankruptcy code that prevents you from paying back creditors post discharge.
9. Bankruptcy Myth: I’m married. Therefore, I have to file bankruptcy with my spouse. Reality: No! One spouse can file bankruptcy and one spouse can choose not to file for bankruptcy.
10. Bankruptcy Myth: I will never get credit again if I file for bankruptcy. Reality: It will not be long before you will start receiving credit card offers again.