Myth Busting Bankruptcy in NYC

If you or a family member has considered filing for bankruptcy in New York City, you may have run into quite a lot of information that didn’t make much sense. Unfortunately, there are a lot of myths about bankruptcy that make it hard for people to get the truth when it comes to filing. Bankruptcy can help you climb out of debt much easier, and for more affordable terms; but it is not a magic bullet that just makes all debt go away. These are a few myths to keep in mind about bankruptcy:

Bankruptcy ruins your credit forever.

Filing bankruptcy will hurt your credit in the immediate sense, but it does not ruin your credit for the rest of your life. You’ll find soon after declaring bankruptcy that you can get approved for quite a lot of lines of credit, because debtors know that you don’t have any other big debts anymore. While it’s not a good idea to just open up a ton of credit cards right after declaring bankruptcy, it does mean that you’ll have options for responsibly rebuilding your credit soon.

Bankruptcy takes care of all your past debts.

Not all debts are allowed to be removed by bankruptcy. Student loans are the most notable exception, but things like back-owed child support, alimony, or restitution payments are also not allowed to be removed by bankruptcy. Additionally, the debts that you do have that can be excused due to a bankruptcy don’t always go completely away. Instead, the bankruptcy trustee will negotiate a percentage that can be paid to satisfy the debt. In some cases, you’ll pay this amount off in a single payment over time, overseen by the trustee. In other cases, your assets, such as second vehicles and family heirlooms, can be seized and sold to satisfy the debts.

You should spend all your cash or get rid of assets right before filing bankruptcy.

Actually, this is considered fraud, and can not only be grounds for denying you the bankruptcy, but can have other consequences as well. In extreme cases, this could mean that you are charged with criminal activity. It’s not a good idea to sell off assets, transfer property to family, spend all your cash, or open up any new lines of credit before filing for bankruptcy. Any out of the ordinary new activity on your financial history will be investigated with a bankruptcy filing.

People who go bankrupt are irresponsible for wanting to get out from under their debt.

The fact is that there are many reasons why a person may want or need to have their debt discharged. It doesn’t mean that they are uncontrollable spenders – it could mean that they were injured and haven’t been able to work, or experienced any number of other unforeseen circumstances. For the average person filing bankruptcy in NYC, the story is always more complex than most people would believe.

The Truth is Bankruptcy is Not a Cure-All, but a Helpful Tool

The fact is that bankruptcy is not a cure-all for debt, but it is a tool that should be explored if you find yourself facing a lot of debt that you can’t get out from under. Thinking of bankruptcy as a tool that you have at your disposal is a much better way to understand what it is, and how it can help you. If you want to find out if bankruptcy could help you, you can get a free consultation from our office. Call us at 212-244-2882 to learn more about filing bankruptcy in New York City.

William Waldner