Common Bankruptcy Myths

Bankruptcy Misconceptions Clarified by 1st California Law

You may be wondering if filing for bankruptcy is the best course of action for you, as it is likely that you have heard some of the common bankruptcy myths and misconceptions at some point during your investigation of the process. For this reason, our firm hopes to dispel some of the rumors and provide you with the facts about this form of debt relief. Although this process may not be right for your financial situation, it is important to understand the truth about both the advantages and disadvantages before making a final decision. For any other questions that you may have that are specific to your case, do not hesitate to consult an Orange County bankruptcy lawyer from our firm.

Understanding the Myths

It is likely that you have heard some of the rumors and stigmas attached to filing for bankruptcy. Although some of these misconceptions may be rooted in factual information, you should not be dissuaded before getting all of the facts. Some of the most common bankruptcy myths include:

#1. Filing for bankruptcy will eliminate all of my debt

While this is one of the many advantages of filing for bankruptcy, this form of debt relief is applicable only when filing for Chapter 7 bankruptcy. Even so, there are certain kinds of debt that cannot be discharged, including taxes, alimony, student loans and child support. When filing for chapter 13 bankruptcy, however, one will pay off past obligations over a 3 – 5 year period, and usually pay only a percentage of the amount owed when the process is complete.

#2. Bankruptcy will ruin my credit score for ten years

People often believe that their credit will be ruined for ten years after the process has been completed, as the bankruptcy petition will appear on their record for this length of time. Actually, an individual's credit can begin to improve after filing, as they will have the chance to re-establish their credit—which will no longer be affected by wage garnishments, late payments or lawsuits. There are effective ways to achieve credit restoration, but it is up to each individual to be proactive in their efforts.

#3. I can spend as much money as I want before filing for bankruptcy

Some believe that if they are already planning to file for bankruptcy that they should just use their credit cards to the maximum limit or transfer money to a relative. This is simply untrue, as doing so could actually prevent you from being able to successfully file for bankruptcy. Spending money that you do not have is never a good idea, especially when you have already accumulated a serious amount of debt.

#4. I will lose all of my assets after filing for bankruptcy

Many people fear that they will lose everything that they own, which is also not true. Many personal possessions, including items such as vehicles, work-related tools and homes up to a certain value, are exempt—meaning that they cannot be repossessed in the bankruptcy process—but making arrangements carefully in these matters is of utmost importance. Most people who file for bankruptcy actually lose none of their assets when the process is managed professionally.

Consult a Santa Ana bankruptcy attorney today!

If you have additional questions about the bankruptcy process, we urge you to consult an experienced attorney from our firm. Making an ill-informed decision regarding your future could prove to be detrimental to you in the end, so it is important to take the time now to gain a better understanding of what is fact and what is fiction when it comes to filing for bankruptcy. Whether you have already made up your mind about the course of action that you would like to pursue or you would like to explore other alternatives, do not hesitate to schedule a free consultation with a bankruptcy lawyer from 1st California Law. Time is of the essence when your financial viability is on the line, so take the necessary steps to get you back on track today.