As with most relatively complex laws and legal procedures, there are a fair number of misconceptions floating around about filing for bankruptcy. Although your best bet will always be to discuss your specific case with a Los Angeles bankruptcy lawyer, the following are the top four myths that we routinely have to dispel.
1. I Need to Be Completely Broke to File
Back in 1978, the bankruptcy laws were changed to allow a consumer to file before he actually lost everything, giving him a chance at a new start while drastically reducing the instances where public assistance was required following a bankruptcy. Today, the sole prerequisite for bankruptcy is that you cannot pay your bills on time in your current situation, which means that you can still have a fair amount of cash, as well as equity.
2. I Can Selectively File for Bankruptcy for Only Some Debts
Many people come to our Los Angeles bankruptcy attorney’s office thinking that they can file for chapter 7 or chapter 13 on, say, just one out-of-control credit card. However, the law considers this discrimination against certain creditors. Bankruptcy is an all-or-nothing game, and if you decide that filing is in your best interest, you need to list every debt, every creditor, and every asset you have. Otherwise, your case will likely be dismissed, you could be charged with fraud, and you’ll have added court fines to your already burdensome debt load.
3. I’ll Lose Everything
Again, this goes back to the 1978 change in the law: the government doesn’t want you to lose everything, because with existing social programs, they’d likely have to help support you. You’ll probably be able to keep your primary residence as well as your vehicle; in addition, family heirlooms and set amounts of cash are often protected. Despite this, depending on how you file, you may have to sell any large “luxury” items, with the funds going to pay back some of your debt.
4. I’ll Never Be Able to Get Credit Again
Your bankruptcy will not appear on your credit report longer than 10 years (and we may be able to get it off much sooner). Moreover, certain creditors actually prefer persons who have recently filed for bankruptcy, as creditors know that such consumers can’t file again for seven years. This may sound a bit sleazy, but it’s all part of the credit/lending business model, according to Los Angeles bankruptcy lawyers. This extends also to obtaining a mortgage. While your interest rate may be higher than normal, you can usually secure a mortgage if you have a decent income and are able to provide a significant down payment. And, as suggested, we offer (very effective) credit repair services.