Fact and Fiction: Myths about Bankruptcy
If you are considering bankruptcy as an option, you need to separate fact from fiction. Consider these points:
Fiction: Changes in the bankruptcy law in 2005 made filing for bankruptcy impossible.
Fact: Legislative changes to the U.S. Bankruptcy Code in 2005 were made to respond to allegations that too many people were using bankruptcy petitions to discharge debt they could have paid. Among other changes made to the Bankruptcy Code, a means test was created to examine eligibility for Chapter 7 bankruptcy, the most common form of bankruptcy filed. If you are eligible, Chapter 7 bankruptcy, or a liquidation bankruptcy, is still available to you.
Fiction: You must have a certain amount of debt to qualify for bankruptcy.
Fact: There is no minimum amount of debt required before you can file bankruptcy. You can file for bankruptcy when you have debt you can no longer pay down over a reasonable period of time with your expected income.
Fiction: If you are employed, you cannot file for bankruptcy.
Fact: Many working individuals carry unmanageable debt. Filing Chapter 13 bankruptcy, or a wage earner bankruptcy, is a good option if you have an income and property you would like to keep.
Last year more than one million consumers and businesses filed for relief under federal bankruptcy laws. With the economic downturn and continuing weak labor market, bankruptcy is an important option to help hardworking people get a new financial start.
For most consumers, bankruptcy is an opportunity to handle overwhelming personal financial problems. There is no stigma attached to getting help when you are in trouble — it’s just being smart. Do not believe the myths. If you have questions, call our office. We can help.