Bills piling up, lawsuits starting, or a foreclosure date creeping closer, bankruptcy can stop all of that immediately. At Yusufov Law Firm PLLC, we help individuals and small businesses in Mesa, Phoenix, and Tucson understand how bankruptcy works and how it can offer real, lasting relief.

Unfortunately, the internet is full of myths and scare tactics. Some come from creditors or debt-settlement companies trying to sell services. Others simply come from misunderstandings of the law. This guide cuts through the noise and explains what bankruptcy actually does so you can make confident, informed decisions.

Myth 1: Bankruptcy Is Hard to Qualify For

Many people believe they won’t qualify for Chapter 7 or that the rules are impossibly strict. Not true.  While income-based guidelines exist, most people struggling with debt still qualify for Chapter 7, and those who don’t usually have workable alternatives, such as Chapter 13 or Chapter 11.

The process might feel overwhelming at first, but with a knowledgeable attorney, clients often say, “I wish I had started sooner.” Filing earlier can also stop lawsuits, garnishments, interest accrual, and foreclosure activity.

Myth 2: You Need a Minimum Amount of Debt

There is no minimum debt requirement to file. Whether the total is small or overwhelming, what matters is whether you can realistically repay it without sacrificing essentials.

Myth 3: You’ll Lose All Your Property

Bankruptcy laws include extensive exemptions that protect your home equity (within limits), vehicle, clothing, household items, and retirement accounts.

If something is not exempt, there are still ways to keep it, for example:

• Paying its value through a Chapter 13 plan
• Negotiating a reasonable buyback in Chapter 7

The system was designed to give people a fresh start, not take away everything they own.

Myth 4: Bankruptcy Permanently Destroys Your Credit

Bankruptcy appears on your credit report, but it does not ruin your financial future.
In fact, many people see an improvement soon after discharge because:

• Maxed-out balances disappear
• Old delinquencies stop dragging scores down
• New credit offers often arrive quickly

A Federal Reserve Bank of Philadelphia study found Chapter 7 filers’ scores rose from an average of 538 to around 620 within months of discharge. With consistent on-time payments, rebuilding happens faster than most expect.

Myth 5: Filing Means You Will Never Own Anything Again

You can absolutely buy a home, car, or anything else after bankruptcy.
Credit access may be limited at first, but with patience and responsible use of new credit, many people finance vehicles within months and qualify for mortgages within three to five years, depending on the lender and chapter filed.

Myth 6: You’ll Never Get Credit Again

Not true. Credit cards are often the easiest to obtain after filing, and many lenders specifically market to post-bankruptcy consumers. Car loans and mortgages take longer, but they are available once income and credit history stabilize.

Myth 7: Filing Means You’ve Failed Financially

Most bankruptcy clients are responsible people who were hit by life events such as job loss, medical issues, divorce, or business downturns. Bankruptcy is a legal financial tool, not a moral failing. Even businesses use it routinely to restructure and move forward.

Filing is often the most responsible choice when debt becomes unmanageable. It stops the downward spiral before it gets worse.

Myth 8: Married Couples Must File Together

Only one spouse needs to file. Sometimes filing together makes sense, but in many cases, only one spouse has significant debt. Filing alone can help preserve the other spouse’s credit.

Myth 9: You Must Be Behind on Payments to File

You can be current on all bills and still file for bankruptcy.   In fact, once you know you plan to file, it usually makes no sense to keep paying unsecured debts like credit cards or medical bills because those debts will likely be discharged.

Myth 10: All Debts Are Wiped Out

Most unsecured debts are eliminated, including:

• Credit cards
• Medical bills
• Payday loans
• Personal loans
• Old utility balances
• Deficiencies in repossessed vehicles

However, some debts survive bankruptcy:

• Child support and spousal support
• Most student loans (unless hardship is proven)
• Most recent tax debts
• Court fines
• Secured debts (car loans, mortgages) unless you surrender the property

You must list all debts in your case, but you can voluntarily repay any creditor later if you choose.

Myth 11: Bankruptcy Removes Secured Debts Without Payment

If you want to keep a house or car, the underlying lien remains. You must keep making payments.

However, Chapter 13 and Chapter 11 give powerful tools to manage those debts, including:

• Reducing car loan balances to the vehicle’s value (if the loan is more than 910 days old)
• Lowering interest rates
• Stripping off junior mortgages if they exceed your home’s value
• Spreading overdue mortgage or tax payments over time

Myth 12: Taxes Can’t Be Discharged

Some tax debts survive bankruptcy, but older income taxes often can be discharged if they meet strict timing rules (commonly called the 3-year, 2-year, and 240-day rules). Even when taxes aren’t dischargeable, Chapter 13 can help by stopping penalties and allowing repayment over time.

Myth 13: Student Loans Can Never Be Discharged

Student loans are hard, but not impossible, to eliminate. A discharge requires proving undue hardship, which involves showing:

1. You cannot maintain a minimal standard of living if forced to repay,
2. The hardship is likely to continue long-term, and
3. You made good-faith efforts to repay.

Courts apply this strictly, but success is possible in the right circumstances.  Additionally, if a private student loan does not meet the strict requirements of a “qualified educational debt”, then it can be discharged automatically through any bankruptcy.

Myth 14: You Should Use Credit Cards Right Before Filing

Maxing out cards before filing is considered potential fraud, and certain purchases made within 90 days, like luxury items or cash advances, may be automatically presumed non-dischargeable. If you’re considering bankruptcy, it’s best to stop using credit cards immediately.

Myth 15: You Can Pay Back Friends or Family Before Filing

Paying friends or relatives before filing creates what’s called a preference, and trustees can demand that money back. Regular payments made for fair value (like renting a home at market rate) are usually fine, but lump-sum catch-up payments are not.

Myth 16: You’ll Lose Your Job If You File

Federal law prohibits employers from firing or discriminating against you for filing. Jobs involving security clearances or financial responsibility may require reviewing debt issues, but many employers prefer a worker who has filed for bankruptcy to one drowning in unpaid debt.

Myth 17: Everyone Will Know You Filed

Bankruptcy is public record, but it’s not broadcast. Most friends, family, and coworkers never know unless you tell them.

Myth 18: You Can Only File Once

You can file bankruptcy more than once. Waiting periods depend on the chapter you filed previously:

• Chapter 7 → another Chapter 7 after 8 years
• Chapter 7 → Chapter 13 after 4 years
• Chapter 13 → another Chapter 13 after 2 years
• Chapter 13 → Chapter 7 after 6 years (with some exceptions)

Life happens, and the law recognizes that.

Myth 19: Debt Consolidation Is Always Better

Debt consolidation only works if you can afford the payments, and creditors must agree to participate. Many people spend years paying into consolidation programs only to end up filing bankruptcy anyway. Bankruptcy, on the other hand, forces creditors to participate and can wipe out qualifying debts entirely.

Myth 20: Bankruptcy Solves All Financial Problems

Bankruptcy wipes out old debt, but it won’t fix overspending, chronic income shortages, or lack of budgeting.   If expenses regularly exceed income, additional steps like reducing major costs, adjusting housing or transportation, or improving employment income may be necessary for long-term stability.

Ready to Take Control of Your Financial Future?

If collection calls, lawsuits, or overwhelming bills are wearing you down, a conversation can bring clarity. At Yusufov Law Firm PLLC, we help people and small businesses across Mesa, Phoenix, and Tucson protect assets, stop collections, and move forward confidently.

Call (520) 745-4429 or visit our contact page to schedule a consultation. You’ll speak with a real person who will listen, answer questions, and help you understand your options.