Bankruptcy Myths

Myths Regarding Bankruptcy

Myth #1: I will lose everything I own.

FALSE. When you file for relief under the bankruptcy code, you are given exemptions to protect a certain number of assets and leave them unreachable to the bankruptcy trustee and creditors. Depending on which state you live in, these exemptions can either be very minimal or extremely friendly. Fortunately for California residents, the California exemption scheme is extremely friendly. In fact, California residents are actually given 2 different exemption schemes to choose from depending on the assets they want to protect.

Most debtors that file for bankruptcy in California are able to protect all of their assets and thus do not “lose” anything. To understand more about how the exemptions work and how we can help you protect your assets, please read our “Bankruptcy Exemptions” page.

Myth #2: I will never get credit again.

FALSE. The main thing about getting credit is keeping up with your credit score. Once you file for bankruptcy relief and receive your discharge, you can immediately start rebuilding your credit. Even though the bankruptcy remains on your credit for upwards of 10 years, as long as you rebuild your credit, you will have no problem getting credit much quicker than that. You will be able to apply for credit cards almost immediately after receiving your discharge, apply for auto loans immediately after receiving your discharge, and only have to wait 2 years to apply for a home loan.

To learn more about how you can improve your credit score, read our recently posted blog titled “The Infamous Credit Score”.

Myth #3: I have to file bankruptcy with my spouse.

FALSE. Your spouse is not required to file bankruptcy with you if he/she chooses not to. This is completely up to you and your spouse whether you file by yourself or whether you file as a couple. If you end up filing on your own, the bankruptcy court will still need to take into consideration your spouse’s income and community property assets though. Also, you will likely need to have the non-filing spouse sign a waiver.

Myth #4: Bankruptcy will not help me with my taxes.

FALSE. As it is true that there is a good chance that you will not be able to discharge your tax obligations in a bankruptcy, that is not always the case. Under certain circumstances, you can discharge your tax obligations by receiving your bankruptcy discharge. In addition, a Chapter 13 bankruptcy could be a very beneficial tool for someone who has a high tax obligation because it provides a protected environment to repay the taxes in a 5-year period.

Myth #5: I am going to file bankruptcy but keep certain creditors out of it.

FALSE. You are required to list everyone that you owe money to, whether you intend to pay them back or not, when you file for relief under the bankruptcy code. That doesn’t mean that you couldn’t voluntarily pay someone back after your bankruptcy is complete though, even though you are under no legal obligation to do so. This is intended to benefit the debtor because if they were able to pick and choose who to list, they would be putting themselves at risk of defaulting on the loans they left out of the bankruptcy and being put in the same position they were prior to the bankruptcy being filed.

Myth #6: I am going to file bankruptcy so I should run up my credit cards before I file.

FALSE. If you intentionally run up your credit cards prior to filing for bankruptcy relief, you are committing fraud and this could put your discharge at risk.

Myth #7: Filing for bankruptcy is too expensive.

FALSE. When looking at the entire scheme of things, it is much less expensive to file for bankruptcy than it is to not file. If you don’t file, you face the risk of being sued and having to defend your case in a civil court, your wages being garnished at up to 25%, your bank accounts levied, and liens placed on your assets. Also, you will at some point have to “face the music” and deal with the debt that you have accrued and that has been increasing each month with late fees and interest payments. By spending a small amount of money today, you can avoid all of that and any cost that is associated with it.

Our office offers payment plans to make it even easier for clients who are in an extremely dire situation.

Myth #8: There is a minimum amount of debt needed to file bankruptcy.

FALSE. There is not a “minimum” amount of debt that is needed to file for bankruptcy relief. Each case is different and speaking with a professional could prove to be very beneficial to you. For example, one person might need to file for bankruptcy relief because he/she has $10,000.00 of unsecured debt while another person might not need to. Don’t compare your situation to others.

Myth #9: It’s okay for me to repay my relatives prior to filing for bankruptcy relief.

FALSE. By doing this, the Trustee has the ability to recover that money from your family member and distribute it to the other creditors in your case. This rule was implemented to prohibit debtors from treating one creditor better than the next. In the Court’s eyes, if you didn’t pay Visa the $10,000.00 you owe them, you shouldn’t be paying your cousin the $5,000.00 you owe him/her.

Myth 10: You can only file bankruptcy one time.

FALSE. As it is true that a Judge could bar someone from filing for bankruptcy relief under certain circumstances, the general rule does not go that far. You are allowed to file for bankruptcy relief after a certain amount of time has passed since your prior case was filed. The amount of time depends on which chapter you previously filed and what chapter you are looking to file now.

Please find below a summary of the general restrictions on how long one must wait to file another bankruptcy after receiving a discharge in a previous bankruptcy case.

Chapter Previously Filed

Chapter Looking To File Now

Length Of Time Required Between Filing Dates

7

7

8 years

7

13

4 years

13

7

6 years

13

13

2 years

 

Myth #11: Everyone will find out that I filed for bankruptcy.

FALSE. It is true that bankruptcy cases are a matter of public record and if anybody wanted to do a search, they could discover that you filed for bankruptcy. However, as a practical matter, the only people that get notice of your filing are the creditors that you owe money to.

Myth #12: I don’t want to lose my car so I will transfer it to my brother before I file for bankruptcy.

FALSE. This would be considered a fraudulent transfer and the Trustee will have the ability to avoid it. Moreover, the majority of times when someone is thinking of doing this, they are doing so because of some advice they received from a friend or a bad attorney. Doing this will make your bankruptcy case much more difficult than had you spoken with a knowledgeable bankruptcy attorney prior to doing anything.

MORAL OF THE STORY?

Don’t believe everything you hear or read!

Contact Bains Legal today by calling 916-800-7690 or by clicking HERE and set up your FREE no-hassle consultation with a top bankruptcy attorney who is ready to review and discuss your particular case.

We help clients in the following areas: Sacramento, Elk Grove, South Sacramento, West Sacramento, Natomas, Citrus Heights, Antelope, Fair Oaks, Gold River, Rancho Cordova, Roseville, Rocklin, Lincoln, Wheatland, Yuba City, Marysville, Woodland, Davis, and Lodi.

Free Consultation

Here at Bains Legal, we set ourselves apart from other firms because we provide direct client to attorney contact from the initial consultation all the way through the discharge in your particular case. We will not pawn your case off to a staff member at any point through the process. When you call Bains Legal, you WILL speak with local Sacramento Bankruptcy Attorney Pauldeep Bains. Please call Bains Legal ASAP at 916-800-7690 to schedule your FREE in-person or phone consultation with Pauldeep Bains and let Bains Legal begin getting you the fresh start that you deserve.

916-800-7690

Do not let another day go by without knowing your legal options. Contact Bains Legal today and you will hear from our highly qualified and knowledgeable attorney who looks forward to speaking with you at your earliest convenience.