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Bankruptcy Myths: Setting the Record Straight

Bankruptcy Myths

Are you considering filing for bankruptcy but are unsure if it’s the right decision for you? With so many bankruptcy myths and misconceptions, it can be difficult to separate fact from fiction. From the idea that bankruptcy will ruin your credit for life to the belief that only financially irresponsible people file for bankruptcy, it’s important to have a clear understanding of what bankruptcy is and how it can help you regain control of your finances.

In this blog post, we’ll be debunking some of the most common bankruptcy myths and providing you with the truth about this financial tool.

1) Married Couples Will Both Have to File

If you assume that you and your spouse need to file bankruptcy, it is likely that you share the responsibility for the debt. It is not uncommon for one spouse to have significant amounts of debt in their own name. It is best to file for bankruptcy on your own in these situations.

If the debt is shared among spouses, then both should file. If one spouse is liable for the debt, and neither spouse files, creditors may demand full payment from the spouse who didn’t file.

2) Bankruptcy Permanently Kills Your Credit

Bankruptcy will not in any way permanently end your credit. Although you may be able to have limited credit access for the seven to ten years that bankruptcy remains on your record, the effects of the bankruptcy are not permanent. You will likely receive credit card offers in the first few weeks after your debt is discharged. These cards will be secured cards with a low limit.

It is amazing how quickly bankruptcy can affect credit scores. The Federal Reserve Bank of Philadelphia reported that Chapter 7 bankruptcy filers in 2010 had an average credit score of 538.2 according to the Equifax scale of 228 to 850. Scores rose to an average score of 620 in the time it took for bankruptcies to be completed. If you file for bankruptcy, your credit is not doomed.

3) You Don’t Have to Pay the Money Back if You Spend Recklessly Right Before Bankruptcy

Credit card debt can be dissolved in Chapter 7 bankruptcy. This means that you should be able to spend ahead and have all the debt removed in court. This is a common myth that many people believe.

A court ruled that charges before filing for bankruptcy are fraud. Fraudulent debt cannot be discharged. Bankruptcy won’t allow you to go on a shopping spree without any debt.

4) It Is Difficult to File for Bankruptcy

One of the most common bankruptcy myths is that it is a complicated and difficult process to navigate. However, this is not necessarily the case. While it is true that the bankruptcy process can be complex, there are resources and professionals available to help guide you through it. An experienced bankruptcy attorney can help you understand the process and assist you in preparing and filing the necessary paperwork. Additionally, many courts now offer online resources and self-help centers to assist individuals in filing for bankruptcy on their own. While the process may not be easy, it is certainly manageable with the right guidance and support.


Many people file for bankruptcy unaware of the other options that might be better suited to their circumstances. To discuss your options, it is best to consult a bankruptcy attorney first. If you are located in the state of California, Tenina Law’s Los Angeles bankruptcy lawyers are your best choice!

5) Bankruptcy Discharges All Debt

One of the most common bankruptcy myths many people thought was that they can file for bankruptcy in the hope of a fresh start and a clean slate. Chapter 7 bankruptcy will eliminate most unsecured debts, including personal loans, credit card charges, utility bills, back rent, and medical bills. You can also get relief from secured debts with Chapter 7, but not all debt can go through bankruptcy.

Child support and spousal support debt cannot be repaid. The Bankruptcy Abuse Prevention Act 2005 also makes student loan debt insolvable, along with most tax debts.

6) Bankruptcy Filers Are Financially Irresponsible

Although it is easy to dismiss bankruptcy filings as reckless spending by people who don’t know how to manage their finances, more often than not, bankruptcy does not result from a personal failure. Divorce, severe illness, and job loss are the main causes of bankruptcy. Fearing that bankruptcy will be seen as an admission of failure, or a reflection on their character, many people avoid bankruptcy. For this reason, bankruptcy is an option that all US citizens have access to.

Many well-intentioned Americans have gone bankrupt due to long-term unemployment, legal fees and support costs from divorce, and high medical care costs. The average long-term unemployment rate was 1.84% from 2013 to 2016. This left 2.8 million Americans without work for six months and more.

Additionally, the cost of medical insurance deductibles has grown sevenfold faster than wages. Bankruptcies are more likely to be due to stagnant wages or poor financial management than they are to an unhealthy economy.

7) Bankruptcy Will Cause You to Lose Everything

You can be sure that if you file bankruptcy, you won’t be left on the streets with anything other than your underwear. The majority of property that is included in bankruptcy filings is exempt, and debtors seldom lose any. While exempt assets vary from one state to the next, your house, cars, and clothes will all be safe.

Many items that creditors are not exempt from often end up being unneeded. Creditors don’t want your flat-screen TVs or smartwatches. Many assets are either of low intrinsic value or heavily encumbered by debt.

8) Bankruptcy Will Not Cause You to Lose Anything

Contrary to popular belief, bankruptcy attorney don’t have as much power as they think. Many people mistakenly believe that an attorney can protect all their assets, including the yacht and mansion. You will lose quite a lot of your assets in Chapter 7 bankruptcy. The exemption doesn’t protect property, and the proceeds can be applied to the debt.

You’ll hear many stories about lucky filers who were able to keep their boats and mansions within their reach, but it’s likely that they didn’t actually own the property. Creditors cannot use assets that are rented, leased, or heavily leveraged.

9) Bankruptcy Can Only Be Filed Once

There is always the possibility that you could find yourself in a financial rut again in your life. You can file for bankruptcy multiple times if you so choose. The maximum number of Chapter 7 bankruptcy filings you can make is once every eight years. Chapter 13 reorganizations are possible once every two years. However, it usually takes three to five to complete a Chapter 13 repayment program. You can file for Chapter 13 bankruptcy immediately after the end of your last reorganization.

Don’t Face Bankruptcy Alone – Contact Tenina Law for Expert Guidance

Are you tired of feeling trapped by overwhelming debt? Don’t let it control your life any longer. At Tenina Law, our experienced bankruptcy attorney are dedicated to helping individuals and families find relief through the bankruptcy process. We understand that the thought of filing for bankruptcy can be daunting, which is why we offer compassionate and personalized service to guide you through every step of the process. 

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Don’t let these bankruptcy myths stop you from taking control of your financial future. Contact Tenina Law today to schedule a consultation and start on the path toward financial freedom. 


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