[John J. Scura III, Esq. explains four of the common myths and misperceptions in bankruptcy in three minutes]
I wanted to go over some common myths and misperceptions in bankruptcy. I get a lot of calls from clients, potential clients, about what happens with a bankruptcy.
"What do I lose? What types of debts can I wipe out?"
There are a lot of misunderstandings about bankruptcy and how it works, and what you can do and can't do.
Will I lose everything I own if I file for bankruptcy?
First, one of the major questions I get is: "Am I gonna lose everything if I file bankruptcy?" Believe it or not, most of our clients, probably 90 to 95%, can file bankruptcy, wipe out all their debt and keep the assets they have.
So, you can keep the house. You are entitled to certain exemptions, depending on the amount of the mortgage and the value of your house, you may save your house. There's a car exemption. There is a cash exemption for money you have in the bank. There's exemptions under the Federal Bankruptcy laws for just about every category of asset that you can think of. Now there's limits to the amounts, but as I said, 90 to 95% of our clients can keep those assets they have and wipe out all their debts.
Will I lose my retirement accounts?
Another misunderstanding is that you'll lose your retirement accounts. Now, retirement accounts in bankruptcy are totally exempt. So, for instance, if you have a 401k and you have $70,000 in that 401k, you will keep it. You'll be able to wipe out your debt and keep that retirement account.
Will I still owe the IRS or the government?
Another common misperception is that you cannot wipe out IRS or state governmental debt. There are certain rules that you can wipe out that debt, depending on how old it is, whether you filed tax returns. But there are instances where you can wipe out tax debt arising from your income.
Will I ever be able to get credit after a bankruptcy?
The other misperception is that you'll never be able to get credit again. Most clients who have some credit damage and come into us with outstanding debts, already have very damaged credit. Filing the bankruptcy cleans out all the credit, all the bad credit. They'll be on the quicker road to recovery in terms of their credit if they do file the bankruptcy than if they wait.
Now, it depends on the situation and what your credit scores are, but the bankruptcy doesn't mean you can't get credit forever after the bankruptcy. There are ways we show you how to rebuild your credit legitimately, and it is definitely not the end of credit if you do file bankruptcy.
So those are some common myths that I would like you to understand, and dispel those myths. Please call our office if you have any questions. We're glad to give you a free consultation to go over your situation and your concerns in terms of bankruptcy.
John J. Scura III
Whether you need to completely eliminate your debt through Chapter 7 bankruptcy, or need to reorganize your credit payments through Chapter 13 or Chapter 11, we are well qualified as a full-service bankruptcy law firm for people in these and other New Jersey counties: Passaic County, Hudson County, Essex County, Bergen County, Morris County, and Sussex County. Call us today at 973-870-0434 or toll free 888-412-5091.