Bankruptcy can be a life-changing process, providing relief and a fresh start for many people. However, misconceptions about bankruptcy persist, causing unnecessary fear and hesitation. Let’s debunk five common myths about bankruptcy. If you’re considering bankruptcy and need expert advice from a bankruptcy attorney in Palmdale, CA, contact Winterbotham Parham Teeple, a PC at 800.400.9000 for a free consultation.

Myth 1: Debtors Lose Everything in Most Bankruptcy Cases

A prevalent myth is that filing for bankruptcy means losing all your possessions. Surprisingly, 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. Exemption laws protect many assets from being taken, and personal property often lacks high sale value, making it not worth seizing.

Myth 2: The Means Test Prevents People from Filing for Bankruptcy

Another common misconception is that the means test stops people from filing for bankruptcy. This is false. The means test only determines whether you qualify for Chapter 7 or Chapter 13 bankruptcy, not whether you can file for bankruptcy at all. Its purpose is to ensure that individuals with higher incomes file for Chapter 13, where they repay some of their debts, rather than Chapter 7, which involves debt discharge.

Myth 3: Credit Scores Take Years to Rebound After Bankruptcy

Many believe that filing for bankruptcy will ruin their credit scores for years. The reality is that credit scores often improve soon after the bankruptcy is discharged. Long-term studies show that scores increase steadily following bankruptcy. While the fact that you filed will remain on your credit report for seven to ten years, its impact diminishes over time. Bankruptcy can be the first step towards rebuilding your credit.

Myth 4: You Cannot Get a Loan if You Are in Bankruptcy

Contrary to popular belief, obtaining loans during bankruptcy is possible. Many debtors going through Chapter 13 bankruptcy have been approved for car loans while their cases are ongoing. Although the terms may not be favorable, these loans are available. Working with a bankruptcy attorney in Palmdale, CA, can help you navigate this process and find loan options that fit your situation.

Myth 5: Debtors Fit into One Category or Another

Each bankruptcy case is unique. The right solution for you may not be the same as for your neighbor, even if you have similar incomes and debt levels. Many factors determine whether bankruptcy is the best option and which type of bankruptcy (Chapter 7 or Chapter 13) is most suitable. This is why consulting with an experienced bankruptcy attorney is crucial before deciding to file.

Seek Expert Advice Today

Believing these myths can prevent you from making informed decisions about your financial future. If you’re considering bankruptcy, it’s essential to work with a knowledgeable bankruptcy attorney in Palmdale, CA. They can provide personalized advice based on your specific circumstances. Contact Winterbotham Parham Teeple, a PC at 800.400.9000 to request a free legal consultation and take the first step towards financial stability.