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Bankruptcy Misconceptions in Illinois

Posted on in Bankruptcy

There is often a misconception that people who file for bankruptcy are forced to do so because they were financially irresponsible. Although there are people who do file for bankruptcy for this reason, the majority of people who find themselves in this position get there because of events that occur of which they have no control over. A loss of employment, a serious medical issue, and divorce are just a few of the reasons that can completely wreck someone's finances and leave them overwhelmed with debt.

There are other bankruptcy misconceptions that people have. One is that filing for bankruptcy wipes out all of a person's debt. Not all debt is dischargeable in bankruptcy. For example, if a person has been court-ordered to pay child support or alimony, that court order is still in effect, regardless of the bankruptcy. Student loans are also not erased as a result of bankruptcy. Ten years ago, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 removed student loans as a dischargeable debt. There are some instances where student loan debt may be included in a bankruptcy, such as if the person has permanent disability and a bankruptcy attorney can determine if a person qualifies under the Fairness for Struggling Students Act of 2013.

Tax debt is another area that a bankruptcy attorney can assist. In most cases, the debt is not dischargeable. However, there are circumstances where the debt can be included or at least reduced from the original amount.

Some people who have decided to file for bankruptcy go out and charge all kinds of purchases right before they file, believing all of this new debt can be included in the bankruptcy. Once they file, they quickly discover how wrong they were. Bankruptcy courts consider that activity fraud and the new debt will not be discharged.

Another myth many people have about bankruptcy is that it will destroy their credit. Bankruptcy actually helps repair a person's credit. The late payments and no payments no longer appear on their credit report. Instead, a person who files for bankruptcy can take advantage of the secured credit card offers they often receive after the bankruptcy is complete. Credit history can be repaired within 12 months.

If you are currently considering bankruptcy, the experienced Lake County bankruptcy attorneys of Newland & Newland, LLP have been successfully working with consumers in the Arlington Heights, Libertyville, Crystal Lake and Waukegan areas since 1993. Contact one of our convenient office locations to schedule your initial consultation today.

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