A recent article from Inside Tucson Business addressed what the author sees as some of the most common myths about bankruptcy. We were very pleased to see this, as Ontario individual bankruptcy lawyers, because these kinds of myths come up often in our work. The article largely addresses bankruptcy's relationship with foreclosure, a subject that is very relevant in Arizona as well as here in southern California, but also discusses credit card debt. In each case, the author, a consumer bankruptcy attorney, debunks the myth and discusses the harm that it can cause. That's a serious concern, because delaying filing for bankruptcy can often make the person or couple's financial problems worse, or at least unnecessarily prolong their suffering.
The first myth is one we've seen a lot: the idea that bankruptcy filers will automatically lose their homes. In fact, bankruptcy gives filers a tool for holding on to their homes under many circumstances. Homeowners typically file for Chapter 13 bankruptcy, which allows them to set up a payment plan to catch up on overdue payments at a rate they can afford. Chapter 7 bankruptcy may also exempt your home equity if you have enough. Another mortgage-related myth addressed by the article is the idea that a short sale, in which you sell the home for less than you owe on your mortgage, can get you out of paying the balance of the loan. This is true for certain California mortgages, but it is not at all universally true and not safe to rely on. Finally, the article discusses settling credit card debt instead of declaring bankruptcy. This may work -- but you must be very careful to make sure that you've got the deal in writing and that any debt relief agency you use is a nonprofit rather than a scammer. Even then, it notes, beware of tax liability for the forgiven debt, which is counted as "income."
Our Yorba Linda personal bankruptcy attorneys could add plenty more myths to this list. Two of the common misconceptions we see are almost polar opposites, in fact. One expands on the "losing my home" idea: the myth that declaring bankruptcy means losing everything and ending up on the street or living off relatives. In fact, bankruptcy is designed to leave filers with enough of the basics to get by, and protect things like family heirlooms, wedding rings and personal property. In fact, many personal items, such as clothing, have no resale value and wouldn't be helpful to creditors anyway. The opposite misconception is the idea that bankruptcy can cancel absolutely every debt the filer has. It can go a long way, but certain debts can't be wiped out, including child support, most student loans and tax debts. However, if you are able to get relief from other debts, you may be able to free up money with which to pay those debts.
Howard Law PC works every day with individuals and couples who are pursing bankruptcy as a way to address serious financial problems and out-of-control debts. One of the most frequent comments we hear from our clients is the idea that filing for bankruptcy is something they're ashamed of doing, because it is an irresponsible way to handle their finances. In fact, our Tustin consumer bankruptcy lawyers would argue that bankruptcy is actually a very responsible move, because it requires hard work and sacrifices in exchange for a chance to start over. Bankruptcy filers sell off everything that is not exempted, as described above, or make payment plans and stick to them for three to five years. At the end of the process, their credit is in the basement -- but they are free of debt. We believe that's absolutely a form of taking responsibility for your debts, but in a way that eventually lets you start fresh and slowly rebuild credit.
If you are considering bankruptcy as a way to handle overwhelming credit card debt, medical bills, mortgage problems or other debt, don't hesitate to call Howard Law for a free consultation. To learn more about us or tell us your story, you can send us a message through our website or call 1-800-872-5925 today.