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Debunking the common bankruptcy myths in California

On Behalf of | Oct 21, 2022 | Bankruptcy Law

Filing for bankruptcy can be a lifesaver sometimes. However, many people in California desist from exploring this option when drowning in debt due to the many false, misguided beliefs circulated around. Taking the time to understand bankruptcy laws and how it works can help you make an informed decision about whether it is the right financial move for you.

You will never be able to get credit again if you file for bankruptcy

Many people who have filed for bankruptcy find that their credit score improves after they receive their discharge. And contrary to popular belief, you can start rebuilding your credit immediately after filing for bankruptcy. There are even some credit card issuers that cater specifically to people with bad credit or no credit history.

The court will seize all your assets if you file for bankruptcy

There are certain types of assets that are exempt from seizure; for example, if you are filing for Chapter 7, the bankruptcy court can let you keep items like your home, car and retirement accounts. These items are generally called the “necessities of modern life,” meaning you need them for normal living and working in California. In addition, bankruptcy laws are meant to help people get back on their feet after experiencing financial hardship, not to punish them.

Bankruptcy is only for “deadbeats” who can’t manage their money

Filing for bankruptcy is not a reflection of your personal character or intelligence. In fact, many smart and successful people have had to file for bankruptcy at some point in their lives. The reality is that anyone can experience financial hardship, no matter how well they think they’ve planned or how much money they make. Things like job loss, medical bills, divorce and other life-changing events can all lead to financial instability and the need to file for bankruptcy.

Bankruptcy discharges all debt

Bankruptcy courts cannot discharge certain types of debt, such as student loans, taxes and child support. This is because they consider them to be in the best interest of the public or the government, and therefore you must pay them back regardless of your financial situation.

If you’re considering filing for bankruptcy but have been putting it off because of these myths, it’s time to get the facts. Depending on your circumstances, this may be the best financial decision you can make.