Trending Now :

The US Housing Market Is Booming. Is a Crash Ahead? Financial Literacy: How to Be Smart with Your Money Non-Fungible Token (NFT):EXPLAINED SKYROCKETED CEO PAY & LONG LINES AT FOOD BANKS Amazon Workers Want to Unionize Another Major City Piloted Universal Basic Income The New Bubble: SPACs SUBMIT YOUR PPP ROUND 2 APPLICATION BEFORE MARCH 31ST Robinhood-GameStop Hearing & Payment for Order Flow Guess Who’s Coming to Main Street Democratic Senators Say No to $15 Minimum Wage BEZOS OUT! President Biden Most Impressive Act Went Unnoticed: CFPB Biden $1.9 Trillion Stimulus Package 2021 IPO DRAFT CLASS: Ranking the Top 10 Prospects $25 Billion Emergency Rental Assistance NO, TESLA IS NOT WORTH MORE THAN TOYOTA, VOLKSWAGEN, HYUNDAI, GM, AND FORD PUT TOGETHER AMAZON TO HAND OUT ITS WORKERS $300 HOLIDAY BONUS Where Does the American Middle-class stand on Student Debt Relief? Joe Biden’s Economic Plan Explained 4 TYPES OF BAD CREDIT REPORTS AND HOW TO FIX THEM What Is the Proper Approach to Not Buy Too Much House? FISCAL STIMULUS PLANS STILL IN ACTION How to Pick Investments for Your 401(k) 10 Simple Ways to Manage Your Money Better All You Need to Know about Reverse Mortgage All You Need to Know about Wholesale Real Estate Credit card Teaser Rates AVERAGE CREDIT CARD INTEREST RATE SURGES TO 20.5 Percent Trump Signs 4 Executive Orders for Coronavirus Economic Relief The Worst American Economy in History WHY CREDIT CARDS MINIMUM PAYMENTS ARE SO LOW? 10 BIGGEST COMPANIES IN AMERICA AND WHO OWNS THEM White House Wants to End the Extra $600-A-Week Unemployment  10 Countries That Penalize Savers FEWER CREDIT CARD BALANCE-TRANSFER OFFERS ARE IN YOUR MAILBOX Private Payrolls and the Unemployment Rate SHOULD YOU BUY INTO THE HOUSING MARKET RESILIENCY? WILL WE GET A SECOND STIMULUS CHECK The Child Tax Credit and Earned Income Tax Credit THE RETURN OF BUSINESS CYCLES Should You Request a Participant Loan or an Early 401(k) Withdrawal? Homebuyers Should Not Worry about Strict Mortgage Borrowing Standards The Potential Unintended Consequences of Mortgage Forbearance All Business Owners Need to Know about the Paycheck Protection Program 10 MILLION UNEMPLOYMENT CLAIMS IN TWO WEEKS HOW WILL THE GLOBAL MIDDLE-CLASS RECOVER FROM A SECOND ECONOMIC RECESSION IN A DECADE? WILL U.S. CONSUMERS CONTINUE TO SPEND? HOW’S YOUR 401(k) PRESIDENT TRUMP SIGNS $2.2 TRILLION CORONAVIRUS STIMULUS BILL MIDDLE-CLASS NIGHTMARE: MORE THAN 3.3 AMERICAN FILED FOR UNEMPLOYMENT CLAIMS IN THE US LAST WEEK. LAWMAKERS AGREED ON $2 TRILLION CORONAVIRUS STIMULUS DEAL CORONAVIRUS STIMULUS PACKAGE FAILED AGAIN IN THE SENATE APRIL 15 (TAX DAY) DELAYED DEMOCRATS AND REPUBLICANS DIFFER ON HOW $2 TRILLION OF YOUR TAX MONEY SHOULD BE SPENT YOU CAN DELAY MORTGAGE PAYMENTS UP TO 1 YEAR, BUT SHOULD YOU? 110 Million American Consumers Could See Their Credit Scores Change The Middle-Class Needs to Support Elizabeth Warren’s Bankruptcy Plan The SECURE Act & Stretch IRA: 5 Key Retirement Changes 5 Best Blue-chip Dividend Stocks for 2020 9 Common Bankruptcy Myths 401(K) BLUNDERS TO AVOID Government Policies Built and Destroyed America’s Middle-Class & JCPenney Elijah E. Cummings, Esteemed Democrat Who Led the Impeachment Inquiry into Trump, Dies at 68 12 Candidates One-stage: Who Championed Middle-Class Policies the Most WeWork: From Roadshow to Bankruptcy Stand with the United Auto Workers Formal impeachment Inquiry into President Donald Trump America Is Still a Middle-Class Country SAUDI OIL ATTACKS: All YOU NEED TO KNOW THE FEDERAL RESERVE ABOLISHED BUSINESS CYCLES AUTO WORKERS GO ON STRIKE Saudi Attacks Send Oil Prices Spiraling REMEMBERING 9/11 What to Expect from the 116th Congress after Their August Recess Should You Accept the Pain of Trump’s Trade War? 45th G7 Summit-President Macron Leads Summit No More Upper-Class Tax Cuts Mr. President! APPLE CARD IS HERE-SHOULD YOU APPLY? THE GIG ECONOMY CREATES A PERMANENT UNDERCLASS 5 REASONS IT’S SO HARD FOR LOW-INCOME INDIVIDUALS TO MOVE UP TO THE MIDDLE CLASS ARE YOU PART OF THE MIDDLE CLASS? USE THIS CALCULATOR TO FIND OUT? WELLS FARGO IS A DANGER TO THE MIDDLE CLASS The Financialization of Everything Is Killing the Middle Class
Common bankruptcy myths
American Middle Class

9 Common Bankruptcy Myths

Common bankruptcy myths are everywhere, even though American consumers have been filing chapter 13 and chapter 7 bankruptcies since modern bankruptcy laws enacted back in the 1930s. 

What is Bankruptcy

Bankruptcy is a federal court proceeding designed to help consumers and businesses reorganize their debt.  Most consumers either file chapter 13 or chapter 7 bankruptcy.Chapter 13 personal bankruptcy is more accessible to file than chapter 7 because it does not discharge your debt. 

Chapter 13 Bankruptcy 

Chapter 13 personal bankruptcy is more accessible to file than chapter 7 because it does not discharge your debt.  You have to submit a three-to-five-year repayment plan to repay all or part of your debt.  Your creditors can disagree with the repayment plan you submitted to the courts.  However, the bankruptcy judge has the final word, not your creditors

Chapter 7 Bankruptcy 

Businesses and consumers who are down on their luck can file for chapter 7 or liquidation bankruptcy.  If you are not earning enough money to make minimum payments on all your debts, you will most likely approve to file chapter 7 bankruptcy. 

Common Bankruptcy Myths

Many Americans are struggling financially.  Both chapter 7 & 13 bankruptcies can provide them with a fresh-start they desperately deserve; however, long-dated myths about bankruptcy stop them from filing.  Here are the 9 common bankruptcy myths:

I’ll Lose Everything I Have

Your homestead or primary home, qualified retirement accounts, including defined-benefit and defined-contribution plans, public benefits, and tools for the trade professionals, are all exempt properties. 

All Debts are Wiped out in Chapter 7 Bankruptcy

Some people believe that filing for bankruptcy will interfere with child support. Student loans, alimony, child support, debt related to fraud, and three year back taxes are all debts that cannot be discharged through bankruptcy

Only deadbeats file for bankruptcy

Some people believe filing for bankruptcy is not an honorable thing to do.  They think that they must pay back every borrowed money regardless of their current financial situation. 

The statement, as mentioned earlier, is half-true. You must pay back your lenders, but your financial situation can be different five years from now.

In 2005, Congress passed, and George W Bush signed new bankruptcies, which limit how often someone can discharge their debts.  So, if you met the stress test, you should not feel ashamed for wanting a fresh start.

My Partner Has to File with Me

Your partner does not have to file bankruptcy with you.  However, you are better off filing together, especially if you live in a community property state.  Filing alone will allow creditors to go after your partner once your bankruptcy is discharged. For properties that you and your spouse own jointly, your bankruptcy administrator might have to sell them.

You Can’t Get Rid of Back Taxes Through Bankruptcy

You can discharge IRS debt through bankruptcy. However, IRS has specific criteria that you have to meet before you can get rid of back taxes through bankruptcy. Here’s a list of debt that you can discharge through Chapter 7 personal bankruptcy:

  • Student loans
  • Alimony
  • Child support
  • Debt related to fraud
  • Three years back taxes

You Can Only File for Bankruptcy Once

In 2005, Congress passed, and George W Bush signed new bankruptcies, which limit how often someone can discharge their debt.  You can file for bankruptcy as many times as you want, but wiping away debts is something you can do every eight years. In the meantime, you can file a chapter 13 bankruptcy.

I Can Max Out All My Credit Cards, then File for Bankruptcy

You can’t run up all your credit cards, then file for bankruptcy. Your creditors would most likely file adversarial proceedings and claim that you obtain the credit card loans by fraudulent means. Bankruptcy judges often agree with the creditors and deem the debt nondischargeable.

Everyone Will Know

Bankruptcy proceedings are public information, a quick search from your county court of clerks might reveal your bankruptcy filing.  The tradeline stays on your credit reports for up to 7 years. So, your prospective creditor would know that you filed for bankruptcy.  

Bankruptcy, both chapters 7 and 13, allow you to streamline your finances and start over.  If you are experiencing severe financial difficulties, worrying about what others think should be your least concern.  

Bankruptcy Discharges All Debt.

Bankruptcy does not discharge all debts.  Here’s a list of debt that you can discharge through Chapter 7 personal bankruptcy:

  • Student loans
  • Alimony
  • Child support
  • Debt related to fraud
  • Three years back taxes

BACK TO TOP
Continue Reading
2 Comments
Advertisement
American Middle Class / May 22, 2021

What to Make of America’s Inflation Spike?

Since the late 1920’s when statistics began to be officially compiled, the US inflation rate...

American Middle Class / May 09, 2021

How to Use Credit Cards Wisely

Lenders want you to be creditworthy before they can finance that house, car, or new...

American Middle Class / May 02, 2021

Time to Start Paying Back the Covid-19 Hardship Withdrawal

Covid-19 hardship withdrawal was made possible by the Coronavirus Aid, Relief, and Economic Security (CARES)...