Bankruptcy can be a powerful tool to help individuals regain financial stability, yet misconceptions about the process persist. These inaccuracies often discourage people from exploring bankruptcy as a viable option.
Here, we debunk five common myths about bankruptcy and provide the facts you need to make informed decisions. If you’re considering bankruptcy, contact Law Offices of Terrence Fantauzzi at (909) 552-1238 for a free consultation.
Myth 1: Debtors Lose Everything in Most Bankruptcy Cases
One of the most pervasive myths is that filing for bankruptcy means losing all your possessions. In reality, this is rarely the case. In Chapter 7 bankruptcies, 97% of cases result in no loss of property for the debtor. Although Chapter 7 is known as a liquidation proceeding, most individual debtors do not have their property liquidated due to exemption laws that protect certain assets. Additionally, personal property often has low resale value and is not worth seizing.
Myth 2: The Means Test Prevents Many People from Filing for Bankruptcy
Another common misconception is that the means test prevents people from filing for bankruptcy. This is not true. The means test is designed to ensure that those with higher incomes are justified in filing for Chapter 7 or Chapter 13 bankruptcy. It determines which type of bankruptcy one qualifies for, but it does not bar individuals from filing altogether. Regardless of income, bankruptcy remains an available option.
Myth 3: Credit Scores Take Years to Rebound After Bankruptcy
Many people believe that their credit score will be irreparably damaged for years after filing for bankruptcy. However, studies show that credit scores often improve right after bankruptcy is completed and continue to rise steadily. While the fact that you filed for bankruptcy will remain on your credit report for seven to ten years, its impact diminishes over time. In the long run, bankruptcy can be the first step towards rebuilding your credit.
Myth 4: You Cannot Get a Loan if You Are in Bankruptcy
It is a common belief that obtaining a loan while in bankruptcy is impossible. This is not entirely accurate. For instance, many debtors going through Chapter 13 bankruptcy have been approved for car loans during their repayment period. While the terms of these loans might not be favorable, they are accessible. The ability to secure a loan can help individuals maintain their financial independence even while managing bankruptcy.
Myth 5: Debtors Fit into One Category or Another
Bankruptcy is not a one-size-fits-all solution. Each case is unique, and what works for one person may not be suitable for another. Two individuals with similar incomes and debt levels might find different solutions to their financial problems. Factors such as the nature of the debt, personal assets, and long-term financial goals play significant roles in determining the best course of action. Consulting with an experienced bankruptcy attorney can help you understand the options that are right for your specific situation.
Consult with an Experienced Bankruptcy Attorney
These myths highlight the importance of seeking professional advice when considering bankruptcy. An experienced bankruptcy attorney can provide the guidance needed to navigate the complexities of bankruptcy law and help you make the best decision for your financial future.
At Law Offices of Terrence Fantauzzi, we are dedicated to helping you understand your options and find the most effective solution to your financial challenges. Contact us at (909) 552-1238 for a free consultation and take the first step towards reclaiming your financial stability.
By dispelling these myths, we hope to empower you with the knowledge that bankruptcy can be a legitimate and beneficial option for regaining control over your finances. Don’t let misinformation deter you from exploring this viable path to financial recovery. Reach out to Law Offices of Terrence Fantauzzi today and start your journey towards a brighter financial future.