Bankruptcy

Sacramento Bankruptcy Attorney Adam Garcia

Bankruptcy Myths

Bankruptcy Myths

Most bankruptcy lawyers “debunk” bankruptcy myths that scare people away from bankruptcy. This page will not do that. This page will debunk bankruptcy myths that are pro bankruptcy; myths that represent misinformation that wrongly lead people to believe that a certain aspect of bankruptcy is more beneficial that it actually is. However, anti-bankruptcy myths also exist which scare people away from the benefits of bankruptcy. To get a balanced viewpoint, read our anti-bankruptcy myths.

Pro BK Myth #1 – I can discharge all of my debts in bankruptcy

In chapter 7 bankruptcy you can eliminate your dischargeable unsecured debts. You cannot eliminate secured debts (debts in which your lender a lien against your property) or nondischargeable debts. Secured debts often include a financed car, house, or other motor vehicle. In chapter 7 bankruptcy you cannot discharge your secured debts, but do have options when it comes to secured debts. For instance, in chapter 7 bankruptcy you have the option of redeeming your car, meaning that you can pay the car lender the fair market value of your car, regardless of how much you owe, and receive free and clear title in return. In addition to the inability to eliminate secured debts in chapter 7 bankruptcy, nondischargeable debts also cannot be eliminated in chapter 7 bankruptcy. Nondischargeable debts include tax debts, student loans, and fraudulently incurred debts.

Pro BK Myth #2 – I can file for bankruptcy as many times as I want

This is only partly true. While you can repeatedly file for bankruptcy there are mandatory waiting periods between bankruptcy filings. For instance, there is a mandatory waiting period of 8 years between chapter 7 bankruptcies. This means that once you file for chapter 7 bankruptcy you must wait another 8 years before you file another chapter 7 bankruptcy petition.

Pro BK Myth #3 – Bankruptcy will restart my credit history

Bankruptcy does not erase your credit history and turn your credit report into a clean slate. Filing for bankruptcy negatively affects your credit score for the short term, but can increase your credit score over the long term. If you have a bad credit history, bankruptcy can increase your credit score after 12 months in certain circumstances. Since you cannot file for chapter 7 bankruptcy for 8 years following your previous chapter 7 bankruptcy, some lenders will feel more secure extending credit to you. On the other hand, if you have an fair to excellent credit history, bankruptcy will greatly reduce your credit score.

Disclaimers

This testimonial or endorsement does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter. We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code. The information contained in this website is for informational purposes only and is not legal advice. An attorney-client relationship can only be established by signing a representation agreement.
*$900 Chapter 7 Bankruptcy Fee Disclaimer: While most cases qualify for the above fee, some cases are complex. Consequently, the above fee is only a sample fee (not a specific or guaranteed fee) and is subject to change at any time due to the necessity of charging more for complex cases.