Bankruptcy Myths in New York
There are many myths about bankruptcy that can deter people from filing. If you are considering bankruptcy, it is important that any decision that you make is based on accurate and up-to-date information. An understanding of what is truthful and what is false about bankruptcy can be an important first step in deciding to begin the bankruptcy process.
Long Island Attorney Explains Common Bankruptcy Myths
Contact The Law Office of Andrew M. Doktofsky, P.C. at 631-812-7020 for a free consultation about questions or concerns you may have about filing for bankruptcy. Attorney Andrew M. Doktofsky’s practice is focused on consumer bankruptcy law and he has the knowledge and experience necessary to explain how bankruptcy can help you.
Call The Law Office of Andrew M. Doktofsky, P.C. today if you have questions about filing for bankruptcy throughout the areas of Suffolk County and Nassau County, New York.
- Income and Bankruptcy Myths in New York
- Loss of Assets or Personal Property Myths in New York
- Tax Debt Myths in New York
- Credit and Bankruptcy Myths
- Repeat Bankruptcy Filing Myths in New York
- Resources for Bankruptcy in New York
Many people believe they are not eligible to file for bankruptcy because their income is too high. While there are income limits for Chapter 7 bankruptcy, a person’s eligibility to file for Chapter 7 can only be determined through a thorough analysis of his or her income, family size and other factors.
People are often surprised to learn that they are eligible to file for Chapter 7 bankruptcy despite relatively high income. And for those people who have too much disposable income to file for Chapter 7 bankruptcy in New York, Chapter 13 bankruptcy may be an option to consider. When determining which type of bankruptcy you may be eligible for in New York, your attorney will look at a combination of factors, most importantly your gross income and your exempt and non-exempt assets. Read more about filing for Chapter 7 and Chapter 13 bankruptcy.
Furthermore, many people believe their job will be affected if they file for bankruptcy. Your current employer is not required to know you filed for bankruptcy. If they do find out you are having financial issues, this is not a justifiable reason to fire a person as long as they are still capable of performing. However, if you are applying for new jobs, a future employer can do a background check and check your credit rating.
A common bankruptcy myth is that a person who files for bankruptcy will lose their home, car, or other personal belongings. This is rarely the case. New York law and the federal Bankruptcy Code provide for generous property exemptions for persons filing for bankruptcy. These exemptions permit most debtors to keep all of their property in Chapter 7. In some cases, a Chapter 7 debtor will have non-exempt property that must be turned over to the bankruptcy trustee. Whether it makes sense to file a Chapter 7 bankruptcy in such a case will depend on the value of the property to be turned over and the amount of debt to be discharged.
There are situations where a person should not file Chapter 7 because they would not be able to protect valuable assets. In that case, a Chapter 13 bankruptcy should be considered, which would allow the debtor to keep their property and repay their debts through a Chapter 13 plan.
Another common myth is that tax debts can never be eliminated in bankruptcy. This is not true, as there are many types of tax debts that are dischargeable. Learn more about which taxes may be discharged in bankruptcy
Most people believe that filing for bankruptcy will permanently ruin their credit. This is rarely true. First, it is important to keep in mind that if you have been late in paying your debts, or have stopped paying them completely, your credit score is most likely poor. It is true that a Chapter 7 or Chapter 13 bankruptcy can remain on a debtor’s credit report for a period of ten years from the filing date.
However, filing for bankruptcy may actually be beneficial to rebuilding your credit. This is because bankruptcy will usually eliminate all or most debts. Your debt to income ratio will improve. This in turn will permit creditors to extend credit to you and allow you to rebuild your credit over time. Furthermore, because a Chapter 7 debtor cannot file another Chapter 7 bankruptcy for eight years, creditors may consider you to be at a lower risk of defaulting on your debts. Keep in mind that any credit that is obtained shortly after a bankruptcy will not be at favorable interest rates. If you wisely obtain credit that you can afford to repay, your credit score will improve over time.
Another myth is that if you file for bankruptcy you will never be able to buy a home. This is also not true, for the reasons stated above. People who file for bankruptcy are often able to get a mortgage within two to three years after filing.
Another common myth is that once a person files for bankruptcy, they will not be able to file again. This is also not true. While the goal of a bankruptcy filing is to enable debtors to become free of debt, sometimes circumstances necessitate a second filing. There are, however, certain restrictions as to when a subsequent bankruptcy may be filed.
- A person cannot receive a Chapter 7 bankruptcy discharge if they were granted a discharge in a prior Chapter 7 case that was filed within the past eight years. The eight years runs from the date that the previous case was filed, not the date of the prior discharge.
- A person cannot receive a Chapter 7 discharge if they were granted a discharge in a prior Chapter 13 case that was filed within the previous six years. However, if the prior Chapter 13 case paid one hundred percent of unsecured debts (or 70% of unsecured debts if it was the debtor’s best effort), then the six year waiting period does not apply.
- A person cannot receive a Chapter 13 discharge if there was a prior Chapter 7 discharge in a case that was filed within the previous four years.
- A person cannot receive a discharge under Chapter 13 if there was a prior Chapter 13 discharge in a case that was filed within the previous two years.
American Bankruptcy Institute – This organization is dedicated to research and education on all matters related to bankruptcy. This site has unbiased analysis of bankruptcy issues and resources for members of the organization, journalists, the public and Congress.
Annual Credit Report – This site provides consumers with a free credit report once every twelve months from each of the nationwide consumer credit reporting companies, which are Equifax, Experian and TransUnion.
Federal Trade Commission – The FTC is a governmental agency that seeks to protect America’s consumers by developing policy and research tools, creating educational programs for consumers and business, and sharing its knowledge with federal and state legislatures.
The Law Office of Andrew M. Doktofsky, P.C. | Long Island, New York Bankruptcy Attorney
Contact The Law Office of Andrew M. Doktofsky, P.C. today for a consultation about your bankruptcy questions and concerns in Suffolk County and Nassau County, New York. Call 631-812-7020 for a consultation with an experienced bankruptcy attorney in New York.