Common Misconceptions About Bankruptcy

What do Abraham Lincoln, Walt Disney, Henry Ford, Rembrandt, Mark Twain, Buckminster Fuller, Larry King and Donald Trump all have in common? They are all incredibly famous people who reached the pinnacle of success in their chosen professions. In addition, as you may have guessed, they are all people who have filed for bankruptcy. The belief that bankruptcy is for people who are failures or is something to be ashamed of is just one of the many myths commonly held about bankruptcy. In fact, bankruptcy is enshrined in our Constitution, and its protections have been available to individuals and businesses that need it throughout our nation’s history.

Let’s take a look at some of the other common myths about bankruptcy.

Myth: In order to receive a bankruptcy discharge, you have to sell everything you own to pay off your creditors first.

Fact: Despite its name, a Chapter 7 liquidation bankruptcy can usually be accomplished without having to sell any assets at all, especially with the assistance of an experienced bankruptcy attorney. The law provides a host of exemptions for the consumer’s property, enabling many people to have a “no asset” bankruptcy, eliminating their debt while retaining their valuable property. An experienced Orange County bankruptcy attorney can help you determine how the property exemptions apply to your particular situation.

Myth: Bankruptcy destroys your credit rating.

Fact: A bankruptcy does appear on your credit report for a period of years, and during that time lenders may charge a higher interest rate when extending credit, but that does not mean that your credit rating is destroyed. In fact, a bankruptcy will wipe your credit slate clean, so to speak, thereby often improving your credit score and giving you a fresh start. As a result, many people begin to receive offers for credit immediately following a bankruptcy discharge, and there are many steps that we can help you take to begin restoring credit right away. You can have a credit score over 700 within 6 to 12 months of your discharge in bankruptcy if you take the steps we teach you to repair and rebuild your credit. Many people with a bankruptcy on their credit report can still obtain credit and finance the purchase of cars or even homes.

Myth: If you or your spouse have filed for bankruptcy in the past, you cannot file again.

Fact: First of all, just because your spouse may have filed for bankruptcy in the past, this does not necessarily impact your ability to file, either separately or jointly. Secondly, there is no law that says you can’t file for bankruptcy more than once. The laws do create waiting periods to obtain a discharge of debts, such as eight years between Chapter 7 filings, or four years from a Chapter 7 discharge to file a Chapter 13.

Myth: Changes in the law have made it very difficult to file for bankruptcy.

Fact: Recent changes in the past few years have changed the eligibility for filing Chapter 7 in the hopes that more people will file Chapter 13 instead. The government favors this approach because it would rather see the banks and other creditors receive payment rather than have to write off the debt. Chapter 7 is by no means out of reach for people who need it, however. If your current monthly income is below the median household income in your state, you automatically qualify. If not, you can still take a means test to determine whether you have enough disposable income to pay your debts or not. If you are not eligible for Chapter 7, you can still find effective debt relief through Chapter 13.

Contact A Reliable Attorney Who Can Help You Move Forward

For bankruptcy help in Orange County, and throughout all of Southern California, contact us online or call our office at 949-274-7080 for a free initial consultation to determine if bankruptcy is right for you.