Don’t Let These 3 Bankruptcy Myths Stop You from Fixing Your Debt Problems in California

Myth #1:  Bankruptcy Is a Sign of a Personal Failing This myth is one of the most damaging misconceptions that exists. Many people refrain from filing bankruptcy because they have been led to believe that bankruptcy is representative of a personal failing. In reality, nothing can be further from the truth. Statistics bear out that the majority of bankruptcy filings in the United States are brought about due to medical reasons. Even people who have insurance often file medical bankruptcies due to medical bills. This is particularly true if you are covered under one of the high deductible plans that have become increasingly common under the Affordable Care Act. One has to remember, that medical costs have soared in recent years, outpacing the rate of inflation and wage growth. One of the impetuses for these soaring medical costs is that fact that insurance companies compensate medical providers at certain percentages for particular services and procedures. Thus, to maximize their bargaining position and compensation in light of the insurance industries’ stance, hospitals and medical providers continue to increase their prices. Unfortunately, when insurance doesn’t cover the bill or covers only part of the medical bill due to a deductible or other reasons, it is the sick or injured individual who is left with the inflated bill. Few people can absorb tens or hundreds of thousands of dollars of medical bills, but bankruptcy can help people escape from this unfortunate consequence of insurance company and medical provider negotiations.

Myth #2: Bankruptcy Means You Lose Everything Bankruptcy was designed to serve the public interest. Congress and the California state legislature recognize that burying people under insurmountable debt burdens is not what is best for the public. If there was no way to ever pay back their debt, many people would stop working or leave the formal economy. Furthermore, the government also realizes that bankruptcy would fail to satisfy the public interest if it left people penniless and on the street. Thus, to provide the fresh start that it promises, bankruptcy allows people to protect certain amounts of property. These protections are known as bankruptcy exemptions. California allows for two sets of exemptions so bankruptcy filers can pick the set of protections that would shield more of their property.

Myth #3:  Filing Bankruptcy Means that You’ll Never Get Credit Again Many people have been told that bankruptcy will follow them forever and that they will never be able to get a credit card or a mortgage again. While it is true that bankruptcy will affect your credit score and impact your ability to secure credit, the myth significantly overstates the problem. To start, many people who file for bankruptcy soon find that there are indeed lenders willing to extend credit. To be clear, these are typically credit cards with high-interest rates and other less than favorable terms. However, it is important to realize that one only pays interest on a credit card if they carry a balance. By charging a few necessities on the card and paying the balance in-full each month, you can avoid the high-interest charges while simultaneously rebuilding your credit score. The bankruptcy will drop off your credit report over time. For a Chapter 13 bankruptcy, it takes 7 years while a Chapter 7 bankruptcy filing takes 10 years to fall off.

Work with Strategic California Bankruptcy Lawyers Our bankruptcy attorneys in Sacramento approach each financial situation in an individualized and strategic manner. We take the time to get to know you, your concerns, your finances, and your goals before we recommend potential plans of action. We understand that bankruptcy is an important decision and that it may be the best means for many people to move forward with their life. To schedule a free and confidential consultation, call the Sacramento or Roseville offices of our law firm at or contact us online.