Myth: People who file bankruptcy tend to be irresponsible.Reality: The reverse is true.
One common misconception is that many people who file for bankruptcy have problems with credit card debt and other forms of unchecked spending.
Some people do struggle with spending and become overextended. Most bankruptcies, however, are caused by unexpected events that are usually beyond the debtor’s control.
Medical debt is the most obvious such event. Treatment for a serious illness such as cancer can be extremely costly, even if you have insurance — and can throw a family’s finances completely off balance.
Loss of a job is another major cause of bankruptcy. If someone is laid off and then experiences prolonged unemployment, the financial consequences are very challenging.
Bankruptcy can also result from the failure of a small business or be used to fight home foreclosure.
Myth: If you file bankruptcy, you have to give up all your possessions.
Reality: Each state allows for exemptions by which you can keep certain property.
Another misconception about bankruptcy is that in exchange for debt relief going forward, you have to give up virtually all of the property you have now.
The reality is generally much more favorable to debtors than that. In California and every other state, there is a system of exemptions by which people who file bankruptcy can keep certain property. There is also a federal system of exemptions. In some states, you can choose between the federal system and the state system. But no matter which system of exemptions a state uses, it provides a way to protect some of your property.
Myth: Bankruptcy isn’t a good choice because it hurts your credit.
Reality: It is possible to rebuild your credit score after bankruptcy.
It’s true that bankruptcy hurts your credit. But most people who could benefit from a bankruptcy filing already have dinged-up credit.
The fact is that after discharging debt through bankruptcy, it is very possible to rebuild your credit fairly quickly by taking a series of tangible steps. Indeed, you can start doing this almost immediately by doing things like reestablishing a record of paying your bills on time.
Call 650-288-1591 today to arrange a no-cost consultation with a knowledgeable attorney. Or, if you prefer, complete the online form. From my office in San Mateo County, I serve clients throughout the Bay Area.
The Law Office of John Iaccarino is a debt relief agency. I help people file for bankruptcy relief under the Bankruptcy Code.