Personal Bankruptcy Tips
All people experience financial difficulty from time to time - rich and poor alike - whether declining cash flow, deteriorating net worth, or unexpected emergency expenses. Fluctuations in the economy and interpersonal relationships guarantee it. The distinguishing characteristic of financial success is nothing more than a personal decision. Anyone can choose to consider inevitable challenges as merely temporary puzzles. And most certainly, puzzles can be solved. In fact, the most successful people enjoy solving puzzles. Consider the following:
Top 5 Personal Bankruptcy Law Myths
"If you file Chapter 7, all credit cards will be canceled." Not true - Frequently, credit card companies contact debtors who file and request the card remain active, so long as reaffirmation agreement is signed that states the card holder agrees to remain liable. A reaffirmation agreement has the effect of removing the individual debt from bankruptcy.
"Your credit will be destroyed for 10 years." Not true - everyone has a credit rating. Today, many lenders specialize in customers with poor credit - even recent discharges in Chapter 7 & 13. Credit merely costs money, for everyone, with the interest rate determined by the lenders assessment of risk. After discharge, high interest credit card offers flood in for most debtors. These solicitations frequently cite the recent discharge, offering to "help" re-establish credit by proof of payment of 21% interest or more.
"You can not open a bank account after discharge." Not true - opening a personal account and receiving debit cards (accepted as credit cards widely) is fairly easy through banks, credit unions and many other financial institutions. However, do expect difficulty opening commercial accounts. This difference is due largely to the way banks and other institutions set withdrawal limits and approve checks drawn on uncollected deposits.
"If you file, lenders can declare all loans in default." Not true - Many security agreements and notes contain a "bankruptcy acceleration clause." This clause states that filing results in immediate default, even if payments are current. The Federal Bankruptcy Code is clear: these clause are legally unenforceable, and so long as payments are made according to terms, no default exists.
"If you discharge debts, you must pay income tax on the benefit." Not true - a discharge in bankruptcy is not taxable. However, if a creditor charges-off your note before filing and thereafter claims a tax deduction for the charge-off (highly likely), the IRS may assess "imputed income" and a levy tax liability. This imputed tax liability then becomes non-dischargeable if filing bankruptcy afterward. A few days difference in filing can easily result in very large variations in non-dischargeable liability.
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