Bankruptcy Myths

3 chairs at a table with a notebook

Myths about bankruptcy have existed ever since the original laws were enacted. The changes in 2005 only added to the misconceptions. At Krigel & Krigel, our job is to dispel the misinformation that prevents many clients from filing.

You Can Still Qualify for Chapter 7 Bankruptcy

In 2005, aggressive bankruptcy attorneys hit the airwaves with scary ads pushing anyone within earshot to file for bankruptcy immediately while the laws would allow it. Yes, there were changes, many of which added steps that must be taken prior to filing. These changes caused people to delay in filing and caused legal fees to increase as a result of extra requirements. A means test has been added to the analysis of whether a debtor will qualify for a Chapter 7 bankruptcy. Despite this obstacle, we find that most of our clients still qualify for Chapter 7 protection.

You Can Still Protect Your Assets

In a Chapter 7 filing, you can choose whether to retain your house and car. If you decide to retain these assets, you must pay the monthly payments as required by the mortgage loan and car loan. In a Chapter 13 filing, if you are behind in your mortgage payments, you can bring your payments current over a period of 36 to 60 months. As a general rule, so long as you make your payments on your car and home, you can keep them.

IRAs, 401Ks, and other retirement accounts are protected from creditors with only a few exceptions. It often happens that debtors will withdraw from their retirement accounts in a well-meaning effort to avoid bankruptcy. Contact us before you take the step to discuss whether it really makes sense to use an asset that would be protected in bankruptcy to pay debts that could be discharged in bankruptcy.

Many Taxes Can Be Discharged

Owing the IRS and other government entities can bring overwhelming stress. However, some taxes can be discharged in bankruptcy. We will help you obtain tax transcripts so that we can analyze whether your tax debt will be discharged. On your behalf, we can contact the taxing authorities to help you set up a payment schedule for the taxes that are not discharged.

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