User:LinhBailey
Bankruptcy is everywhere. Personal bankruptcy has an effect on anyone like, although not constrained to, Debtors, Creditors, Lending Institutions, Accountants, Fiscal Analysts, Home loan Brokers, True Estate Brokers, Every type of Legal professionals, Possible Homebuyers, House owners of Serious Residence, The President with the Bank of Mother & Dad, etc. Therefore, an understanding from the Individual bankruptcy Code and the principals enunciated therein are essential for anyone.
Individual bankruptcy law is extremely complex and, like other specialties, takes a significant investment of time to master. The purpose of this article is not to make you an expert in Individual bankruptcy law. This article is intended merely to apprise you of various misconceptions about Personal bankruptcy that arise every day. As with any area in the law, you should seek the advice of an experienced attorney before taking any action.
There are several misconceptions about Personal bankruptcy that everyone should be aware of. I will attempt to dismiss the most blatant misconceptions. Here is my Top rated ten list of Common Bankruptcy Misconceptions.
1. The debtor (footnote 1) must be broke to file Individual bankruptcy.
Nothing can be further from the truth. With limited exceptions, the only requirement to file for Bankruptcy is that the Debtor cannot pay their bills as they come due (sometimes referred to as money distress). This makes sense when given some thought. If a person had to be broke to file Personal bankruptcy, that person would not be able to pay their attorney, which would lead to a proliferation of pro se Debtors which would clog the Courts and drive the entire Individual bankruptcy Court system insane.
Next, if the "broke" Debtor cannot file Personal bankruptcy, they would in all likelihood become public charges since they have nothing left to live on. To avoid this burden on the government, Congress has permitted "exemptions" to allow Debtors to keep a certain amount of residence despite the Bankruptcy filing. For example: in New York a person filing for Individual bankruptcy is permitted to have, among other things, up to $5,000 in cash, $4,000 worth of equity in an automobile as well as unlimited funds placed in a qualified 401K plan (footnote 2).
Finally, because individuals and businesses normally wait till they are broke to seek Personal bankruptcy advice, this unnecessary delay precludes options available to them which may help them reorganize their finances and permit them to keep part or all of their house. For example, an individual normally waits until the day before a foreclosure sale to seek Individual bankruptcy advice where had they sought advice earlier; their chances of saving the property would have been greatly improved.
2. If an individual files Personal bankruptcy, his/her credit will be ruined and (s)he will not qualify for credit in the future.
A blatant lie! The fact that an individual files for Individual bankruptcy will appear on the individual's credit report for up to ten years. While this may seem draconian, this is not as bad as it may first appear.
First, if an individual is considering filing Personal bankruptcy, their credit is probably not that great to begin with. Filing Bankruptcy may be their best bet to "get good credit" again. Why you ask? The rationale is simple. When a Debtor files for Bankruptcy under Chapter 7 of your Individual bankruptcy Code and receives a discharge (footnote 3), a Debtor cannot receive another discharge under Chapter 7 for at least eight (8) years.
Lets pretend you are the head of a credit card company in charge of deciding to whom to extend credit and you have two identical applicants with one exception, one in the applicants filed Bankruptcy three months ago. Who would you extend credit to? Applicant #1 who never filed for Individual bankruptcy and who could file Individual bankruptcy at any moment after taking your money thereby discharging your debt? Or would you extend credit to Applicant #2 who filed for Individual bankruptcy three months ago and who recently received a discharge under Chapter 7 with the Bankruptcy Code thereby insuring that your loan cannot be discharged under Chapter 7 for at least the next eight (8) years?
The answer is simple, in the above hypothetical, the person who recently filed Individual bankruptcy is the better credit risk because an individual can receive only one discharge under Chapter 7 every eight (8) years. This, in reality results in the individual who filed Personal bankruptcy receiving dozens of new credit card offers within weeks of filing Bankruptcy!
