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Bankruptcy Fallacies – Part I

new york bankruptcy lawyerOne of the most widely held beliefs concerning individuals who file bankruptcy is they will never be able to obtain credit again. This is simply untrue. Although a bankruptcy filing will be maintained on your credit report for 10 years, most individuals who file bankruptcy can rehabilitate their credit within 18 months. A debtor who files for chapter 7 bankruptcy can eliminate all of his or her debt.

If the debtor obtains a secured credit card after filing bankruptcy and makes credit card payments on a regular basis he or she can reestablish credit. When this debtor files a new credit application, the financial institution will see all prior debt was discharged in bankruptcy and the individual, for the past 18 months, has been paying his or her debt on time. This makes this individual less of a credit risk to the financial institutions.

In my legal practice, I have represented individuals who have filed for bankruptcy three times during the course of my career. This means after the first and second bankruptcy they are able to establish credit all over again, run their credit up, go bankrupt again and then do a third time.

Individuals Who File Bankruptcy Can’t Have Assets

It is a mistaken belief that before someone can file bankruptcy they have to have virtually no assets. This is untrue. New York State has an exemption statute of $150,000 for equity in a home (this statute depends on which county the home is located in). There are also exemptions under New York State law for $5,000 in cash and a car with up to $4,000 in equity in it. New Yorkers can also choose to utilize Federal exemptions. Under Federal exemptions, there is a $21,625 exemption for the value of a home and $10,825 for cash held by the individual filing for bankruptcy.help in filing for bankruptcy

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