There are many myths associated with filing for bankruptcy that make many Californians reluctant to take the official step to reset their financial future. Among those are the notion that bankruptcy ruins a petitioner’s credit and that they will lose everything they own. That is not exactly true, even though a Chapter 7 bankruptcy can include a trustee selling some property to pay creditors. But, there are some misconceptions that people should understand before making a final decision to file.
Married couples must both file
One major misconception about bankruptcy is that married couples must file together when one spouse needs bankruptcy protection. While there may be some complications for married filers, these situations generally do not apply in many cases.
All debt is discharged
Another misconception about bankruptcy petitions is that all debt will be discharged. This is also a myth because there are certain debts that cannot be discharged for any reason. Most discharged debt is done through a Chapter 7 filing that can also require the trustee to sell non-exempt property.
Personal credit ratings are permanently affected
Credit ratings are affected by a bankruptcy filing, but borrowing restrictions in general are temporary until the petitioner can rebuild their credit over time. Bankruptcy begins the rebuilding process, and some lending agencies are primarily concerned with ability to pay for those going forward because the primary restrictions associated with bankruptcy is being ineligible for filing again for the next seven years.
There are other myths regarding bankruptcy that potential California petitioners should also research when evaluating whether or not to file. Preparation for bankruptcy can be as important as the actual filing itself, and knowledge of the process is important before filing.