What are some common myths about bankruptcy?

On Behalf of | Sep 1, 2021 | Bankruptcy |

As a resident of California, it’s important to look into all your options if you’re in debt. If you’ve established that bankruptcy is the only way out, you shouldn’t be scared. There are many myths about bankruptcy, but it’s important to know the reality of filing.

Bankruptcy permanently destroys your credit

Perhaps the most common bankruptcy myth is that it can permanently destroy your credit. While it can cause your credit score to take a nosedive and remain on your credit report for seven to 10 years, the effects of bankruptcy are not permanent. You may even get some credit card offers shortly after your debt has been discharged.

Bankruptcy will discharge all debts

Filing for Chapter 7 bankruptcy will discharge most of your unsecured debts. However, not all of it is discharged. Debts that are usually eligible include medical bills, personal loans, and credit card balances. However, debts like alimony and child support are not eligible for discharge through bankruptcy.

Everyone who files for bankruptcy is irresponsible with money

It’s a common misconception for people to think everyone who files for bankruptcy is irresponsible with their money. However, in reality, there are certain reasons why a person might file. In many cases, it’s due to divorce, losing a job or suffering a serious illness. Bankruptcy can help people to eliminate a good portion of their debt and rearrange other obligations to make it easier to pay them back.

Filing for bankruptcy means you’ll lose everything

Another common myth surrounding bankruptcy is that filing means you’ll lose all of your possessions. This isn’t true as you can keep most of your property, including your home, vehicle and personal possessions.

You’re only able to file for bankruptcy once

This is another myth. In reality, many people who file for bankruptcy end up filing again at some point. Some people even file for Chapter 13 bankruptcy after completing Chapter 7 as a way to reorganize their debts and repay their creditors. However, depending on the type of bankruptcy you wish to file, you must wait a certain number of years before you can file again.

It’s important to have all the facts before you file for bankruptcy. Knowing the myths and what’s true can also help.