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DEBUNKING BANKRUPTCY MYTHS

Giovanni Orantes Sept. 3, 2020

With all the information available today regarding bankruptcy, it is no surprise that much of the information is either misleading or false. In some cases, companies may lie to you to get your business or to keep you from moving forward with filing for bankruptcy.

The Orantes Law Firm can help dispel common bankruptcy myths and get you on the path to a fresh start. We’re committed to providing the kind of professionalism and expertise that you’d find at a larger firm, but with the personalized attention and dedication of a smaller firm. Contact us today for a free consultation. We serve clients throughout Los Angeles and Orange counties.

THE TRUTH ABOUT BANKRUPTCY

If you’re considering filing for bankruptcy, it’s important that you understand the truth about what bankruptcy entails and how it may impact your life.

MYTH #1: BANKRUPTCY PERMANENTLY RUINS YOUR CREDIT.

Truth:

Bankruptcy only stays on your credit report for up to ten years. But in many cases, since the bankruptcy reduces your debt-to-income ratio, your credit will be better than it was before you filed within as a little as 18 months.

During that time, you can slowly rebuild your credit by doing the following:

  • Pay your monthly bills on time

  • Avoid maxing out your credit limits

  • Get a secured credit card

  • Pay down your remaining debt quickly

  • Minimize the amount of debt you take on

  • Minimize the number of debts you take on

  • Monitor your credit report and correct any mistakes

MYTH #2: BANKRUPTCY DISCHARGES ALL OF YOUR DEBTS.

Truth:

According to Section 523(a) of the Bankruptcy Code, there are 19 categories of debts exempt from Chapter 7 and 11 bankruptcies. The code exempts even more debts from a Chapter 13 bankruptcy. Examples of debt that cannot be discharged include:

  • Alimony or child support

  • Certain unpaid taxes

  • Personal injury damages

  • Debts not listed in the bankruptcy filing

  • Some school loans

Before you move forward with bankruptcy, make sure you understand what type of bankruptcy is right for you and which debts are dischargeable under bankruptcy.

MYTH #3: YOU LOSE ALL YOUR POSSESSIONS IN A BANKRUPTCY.

Truth:

Determining which possessions you will keep and which possessions you will lose in a bankruptcy depends on a variety of factors, including your current financial situation. Some people lose thousands of dollars in possessions while others retain what they own.

As a general rule, you may protect the property you need to live and work. Nonexempt property may include luxury or high-priced items that you can use to pay off debt. The bottom line is this: you are not likely to lose all of our property unless there are other legal issues beyond the bankruptcy pending.

MYTH #4: IF YOU ARE MARRIED, YOU BOTH HAVE TO FILE.

Truth:

The rule of thumb with filing bankruptcy is you are responsible for your debts. Therefore, your spouse is not required to file bankruptcy if you choose to file. However, if you file bankruptcy without your spouse, only your personal debts are discharged. If the debts are held jointly, the non-filing spouse still owes the debt even after you have filed bankruptcy.

The bankruptcy will appear on your credit report, but should not appear on your spouse’s. If you notice that the bankruptcy has shown up on your spouse’s credit report, you should address the error immediately.

MYTH #5: BANKRUPTCY WILL NOT STOP CREDITOR HARASSMENT.

Truth:

Bankruptcy ends creditor harassment. By law, creditors must stop contacting you once the bankruptcy is filed. This includes all forms of communication, including phone calls, text messages, letters, or emails. All creditors will receive an automatic stop. This means that they must cease contact, wage garnishment, debt collection lawsuits, repossessions, foreclosure, or evictions.

The automatic stay also prevents your utilities (phone, power, water, etc.) from being shut off. The automatic stay does not prevent criminal proceedings, child custody proceedings, or certain tax proceedings. It is possible for a creditor to get around an automatic stay, but only in certain circumstances.

GET HELP FROM A SKILLED BANKRUPTCY ATTORNEY IN LOS ANGELES COUNTY, CALIFORNIA

If you are looking for real answers to your bankruptcy questions, then contact The Orantes Law Firm today. We offer comprehensive legal services for all types of bankruptcies. Contact our office today to get a free case review from a bankruptcy attorney in Los Angeles County and Orange County, California.