When you are dealing with serious debt, it can difficult to figure out a way to stop the mounting bills and constant collection calls. The good news is that by filing for relief through bankruptcy, you can get a much-needed break from your financial stress and the fresh start you need. If you are unfamiliar with bankruptcy, you may have some misconceptions about this topic that could be getting in the way of you taking charge of your financial future. The best place to begin is by getting the facts. Here are 10 myths about bankruptcy.
- I Will Have to Give Up Everything- Many people believe they will have to surrender their homes, cars, and everything they have of value when they file for bankruptcy. Both Chapter 7 and Chapter 13 bankruptcy have exemptions that permit filers to retain specific property. Further, Chapter 13 allows the debtor to keep their home and enter into a repayment plan for their debts. Exempt property will not be liquidated during a Chapter 7 case or taken from a Chapter 13 debtor.
- My Credit Will be Ruined Forever- Yes, the bankruptcy will be on your credit report. The event will be reported for the next ten years. The fact that you have a bankruptcy on your credit report is not necessarily fatal to your credit score, however. Chances are your credit was probably suffering due to missed payments. Your bankruptcy may clear out some of your debt balances and improve your debt-to-income ratio. When creditors see on-time payments and less debt, your FICO score may actually go up, even with a bankruptcy on your record.
- My Spouse’s Credit Will be Ruined- A common fear is that filing for bankruptcy means that your spouse will also have to file. Not true. Husbands and wives can file jointly, but they are under no obligation to do so. Your spouse’s credit can remain completely untouched by your bankruptcy. There can be situations, such as when you are both obligated to the same debt, where it may make sense to file together. If you have questions about filing with your spouse, you should talk with an experienced bankruptcy attorney.
- I Will Never Qualify for A Credit Card Again- Whether you file for Chapter 7 or 13, creditors will offer you the opportunity to borrow after you file. In fact, you may get offers very soon after your case begins. The offers are probably not going to be at the best rates or under the most favorable terms. Often getting a secured credit card where you pay a deposit to the company is a good option for rebuilding your credit if you can use it responsibly. You can use the card to show your creditworthiness by making on-time payments, gradually re-building your credit and credit score.
- I Can Only File Once- Some people believe that they can only file for bankruptcy one time in their lives. This is a myth. There are waiting periods for how long it will take to discharge your debts, but you can file both Chapter 7 and Chapter 13 more than once.
- I Can’t File Because I Make Too Much Money- A common misconception is that you won’t be eligible to file for bankruptcy if you make too much money. If your household income is above a certain amount and you want to file for Chapter 7, you will have to pass the California Means Test. If, for some reason, you don’t pass the Means Test, you can still file under Chapter 13.
- My Creditors Will Still be Able to Sue Me- The automatic stay goes into effect when you file for bankruptcy. Except for a few specific types of actions related to non-qualifying debts, most debt recovery attempts have to stop and remain stopped while the stay is in effect. For example, unsecured creditors such as credit card companies who have been threatening to sue you for payment can’t move forward while the stay is in place.
- Everyone Will Know I Filed for Bankruptcy- Although bankruptcy is a public process, unless you are famous or someone is looking into your credit or the court data, it’s not likely anyone will know you filed for bankruptcy unless you tell them. This information is not published in the newspaper or online. Outside of appearing on your credit report and in the court’s records, it won’t be anywhere public.
- Filing for Bankruptcy Means That I am a “Bad” Person or a “Failure”- Falling behind on your debt is not a personal flaw or a moral defect. People need bankruptcy relief for a variety of reasons. For some, a catastrophic illness or severe injury may have led to tens of thousands of dollars in medical bills and unpaid household debts. For others, an unexpected job loss could have resulted in missed mortgage and credit card payments. Still, some may have gotten into trouble with credit card spending because they needed help with budgeting. Whatever the case may be, taking charge of your debt through bankruptcy doesn’t make you a “bad” person or a “failure.” Taking this step shows that you are ready to address the issue and make a new start.
- Filing Will Make My Life More Stressful- When you are under the strain of excessive debt, knowing how to deal with the issue can seem challenging. The idea of adding a legal case to your already stressful situation may seem counterintuitive. However, a bankruptcy case is not like a standard lawsuit, especially when you have an experienced California bankruptcy attorney on your side. Your attorney can help you navigate the process of figuring out the best way to get to your fresh start.
Contact the Law Office of Raffy Boulgourjian
Attorney Raffy Boulgourjian is a California bankruptcy attorney with over twenty years of experience representing clients and can help you with your bankruptcy. Contact Mr. Boulgourjian today to schedule a free legal consultation to discuss your California bankruptcy law needs.