1. Under the new bankruptcy laws, there is no longer a "Fresh Start Bankruptcy", and I will have to pay back all of my unsecured debts.

a. This is definitely not true. There was a change in the bankruptcy laws in October of 2005, but it did not get rid of Chapter 7 bankruptcy or the "fresh start bankruptcy". What the change in the law did do, was require all debtor to pass a “means test” that was implemented by Congress to qualify for a Chapter 7. Most people that qualified for a Chapter 7 prior to the law change will probably still qualify. You will need to contact an experienced attorney to determine your eligibility to file a Chapter 7 Bankruptcy.

2. All debts are wiped out in a Chapter 7 Bankruptcy.

This is a falsehood. Not all debts are can discharged in a Chapter 7 Bankruptcy. The debts that cannot be discharged include child support, alimony, most student loans, some taxes, and debts incurred as a result of fraud.

3. I'll never be able to get credit again.

This is perhaps one of the biggest misconceptions about bankruptcy; in fact in many instances it may help you rebuild your credit. Once you file for bankruptcy most of your debts will be discharge, and with the discharge your income to debt ratio will improve drastically which will actually help you in the long run. Also once you file you will soon be getting credit card offers again. These credit cards will most likely have low limits and high interest rates, but the use of these cards will help you to start rebuilding your credit score and you will soon be on your way to having good credit again.

4. I'll never be able to buy a house if I file for bankruptcy.

This is definitely not true! Filing from bankruptcy does not preclude you from purchasing a home. While it is generally not recommended that a consumer purchase a home immediately after filing for bankruptcy, most people utilize the opportunity as taking a step in the right direction to owning a home. Remember, there are many criteria to consider when purchasing a home, such as your credit rating, income to debt ratio, and the down payment just to name a few. So when you file for bankruptcy you may be able to strengthen you position on the other criteria. Think of how much you can save for a down payment if you weren’t burdened by those monthly credit card payments!

5. I will lose all my possessions if I file for Bankruptcy.

a. This is absolutely false. In most instances you will be able to keep everything you own. Each state has its own set of exemptions (laws that outline what you are allowed to keep in when you file for bankruptcy). California is very liberal with its exemptions; you should ask an experienced attorney for more information on what assets you may retain.

6. Everyone will know that I filed for bankruptcy.

Although bankruptcy filings are public record, in most instances no one will ever know you have filed except your creditors. Unless you are famous or a large corporation and the filing is picked up by the media, there is a good chance that no one you know will ever find out.

7. If I am married does my spouse also have to file?

The simple answer to this question is no. Your spouse does not need to file when you file for bankruptcy, but if there are any debts that you are both liable for, the creditor may just go after the non-filing spouse once the debt has been discharged by the spouse that filed.

8. Filing for bankruptcy is morally wrong.

Life doesn’t always work out the way we plan. Many people are forced to deal with unforeseen obstacles, such as divorce, unemployment, or medical emergencies. Most people struggle with debt there whole life and don’t get anywhere, so bankruptcy is there to help those individuals that need a little bit of extra help.

9. Can I keep some credit cards when I file for bankruptcy?

When filing for bankruptcy you cannot pick and choose between who you want to pay back and who you don’t. So the simple answer is no, you cannot keep some of your credit cards, but you can keep those cards that have no balance, because those cards have no debt and do not need to be listed in your bankruptcy.

10. Can I max out my credit cards before I file for bankruptcy?

a. Maxing out your credit cards in anticipation of filing for bankruptcy can constitute fraud and is certainly not recommended!!

11. I can only file for bankruptcy once.

This is not true, you can file for a chapter 7 every 8 years and there are different rules for Chapter 13's. You should contact one of our attorneys if you need more clarification.

12. Filing bankruptcy will hurt your credit for 10 years.

This is perhaps the most common misconception. It is true that the bankruptcy is listed on your credit report for 10 years, but that does not necessarily mean that you have bad credit for 10 years. In most instances by the time you need to talk to a bankruptcy attorney your credit is already bad, and the only way to rebuild your credit is to either pay off the debt, or to start over. Now if it was that easy to pay off your debts you would have done it a long time ago, so allowing yourself to start over by filing for bankruptcy may be the next best option.