If you’re in San Diego and buried under debt, you’ve probably heard the horrible stories about bankruptcy.
Maybe a friend told you it ruins your life forever. Maybe a family member warned you that you’ll lose everything. Or late-night Googling left you even more confused.
Those stories keep good people stuck, paralyzed with fear, while interest piles up, creditors keep calling, and the stress steals your peace of mind and health.
Thousands of residents struggling with overwhelming debt consider bankruptcy but hold back. Why? Because of myths, half-truths, and outright misinformation that paint bankruptcy as a financial death sentence rather than the fresh start it’s meant to be.
In this blog, we’ll dispel the bankruptcy myths that keep people in debt longer, reveal the truth behind them, and show you how to move forward with confidence.
12 Myths That Mislead People & Don’t Let Them Choose Bankruptcy (12 Truths Will Be Revealed)
At sandiegobk, we see this all the time… people wait years, stuck in fear, only to say afterward: “I wish I had done this sooner.”
Here are 12 myths that need busting… and the reality checks that set the record straight.
Myth #1: Only Careless and Broke People File for Bankruptcy.
Reality check: Most bankruptcies come from things you can’t control. It could be a medical emergency, sudden job loss, divorce, or even rising costs in San Diego’s expensive housing market.
Plenty of hardworking, responsible people file every year because life threw them a curveball. Bankruptcy doesn’t mean you are negligent; it means you dare to hit reset when the system has trapped you.
Myth #2: Filing for Bankruptcy Will Ruin My Reputation.
Reality Check: Many San Diegans delay filing because they’re embarrassed, worried their neighbors, boss, or friends will find out. No doubt, Bankruptcy is a public record, but it’s not published in the local paper, unless you’re a celebrity.
The only people likely to know are your creditors, your attorney, and anyone you choose to tell. In most cases, your employer never even knows. The only time they’re contacted is if your paycheck is being garnished, and bankruptcy can fix that.
Most people who file go on with their lives, and nobody ever knows.
Myth #3: Bankruptcy Means I’ll Never Have Access to Credit Again.
Reality Check: Bankruptcy can actually be the first step to rebuilding credit. Yes, bankruptcy will appear on your credit report. But so does every missed payment, charge-off, and collection notice. If you’re already struggling, your credit may already be suffering.
The difference is this: Filing stops the fall and gives you a fresh start to rebuild. Many clients in San Diego see pre-approval offers for credit cards and car loans within a year. With the right plan, you can qualify for a mortgage much sooner than you think. That makes you less risky, not more.
Myth #4: Filing for Bankruptcy Wipes Away All My Financial Problems.
Many San Diegans believe two things:
- They can just grind their way out of debt
- Bankruptcy is some magic eraser that wipes every debt clean.
Neither is true.
Reality Check: If it were as simple as toughing it out, you wouldn’t still feel trapped. With credit card interest rates often above 20%, minimum payments barely touch the balance, keeping you in debt for decades.
On the other hand, bankruptcy doesn’t erase every debt. Certain obligations like child support, recent taxes, and most student loans remain.
But the good thing? Bankruptcy eliminates the unmanageable debts like credit cards, medical bills, and payday loans, so you can finally keep up with the rest.
Myth# 5: Bankruptcy Means Losing Everything
Reality Check: Bankruptcy DOESN’T mean losing everything.
One of the biggest fears San Diegans have is that filing for bankruptcy means saying goodbye to their home, car, or even basic belongings. The reality is the opposite.
Bankruptcy laws are designed to protect you, not strip you bare. California offers generous exemptions that safeguard essentials, your retirement savings, personal property, and even significant equity in your home through the homestead exemption. Cars are protected too, and if you have a loan, you can usually keep it by continuing payments.
Bankruptcy gives you a legal safety net.
Myth #6: Only People with No Income Can File
Reality Check: Bankruptcy helps people having various income levels. Many think you have to be jobless or destitute to qualify. In reality, both Chapter 7 and Chapter 13 bankruptcies help people at different income levels:
- Chapter 7 is typically for those with limited income who need a complete discharge of unsecured debts.
- Chapter 13 is often used by people with steady income who need time to catch up on secured debts like mortgages or car loans.
San Diego professionals, business owners, and families with decent incomes file every day; it’s not just for those with nothing left.
Myth #7: Filing Bankruptcy Erases Any Chance of Building a Business
Reality Check: Actually, some of the most successful entrepreneurs in the U.S. filed for bankruptcy before their big break. Walt Disney, Henry Ford, and even modern business leaders have used bankruptcy to recover.
Filing doesn’t prevent you from starting a business in the future; it just clears the slate so you can build again without old debt dragging you down.
For small business owners and self-employed workers, bankruptcy can be the difference between closing your doors forever and getting a true second chance.
Myth #8: Bankruptcy Is Just Too Expensive
Reality Check: We get it.
When money is already tight, the last thing you want is another bill. But…
- Bankruptcy costs a fraction of what you’re already paying in interest each year.
- It’s a one-time process that clears debts permanently.
- Payment plans are often available for the legal fees.
In other words, you’re not buying, you’re getting your freedom back.
Myth #9: Even After Filing, Creditors Will Still Come After Me
Reality Check: Actually, the opposite is true.
The automatic stay comes into effect the moment you declare yourself bankrupt. This is a strong federal court order that:
- Terminates targeting calls immediately.
- Freezes wage garnishments
- Puts lawsuits and foreclosures on hold.
Creditors who continue to harass you once they have been filed can be subject to severe punishments. Bankruptcy does not make creditors more powerful; it deprives them of their power.
Myth #10: Filing Bankruptcy Erases Every Opportunity Ahead.
Reality Check: Many San Diegans fear that bankruptcy is the end of the road. But it’s often the beginning of a healthier financial life.
Bankruptcy removes debt but leaves your skills, your career, and your earning potential intact. Within months, you can start rebuilding credit. Within years, you can buy a home, start a business, or even qualify for better loans than before.
Bankruptcy doesn’t erase your life; it rebuilds it.
Myth#11: After Filing, the Court Takes Control of All My Money.
Reality Check: When you declare bankruptcy, it does not mean that you are giving your salary and bank account to the court forever. Here’s what really happens:
- Chapter 7: Where a trustee is allowed to look at your assets, however, your assets are mostly exempt in California, so you are still able to keep your earnings in the future.
- Chapter 13: It allows you to repay over the next 3-5 years; however, it is not permanent and you are free to manage your income once you have to make the required payments.
Bankruptcy is a temporary arrangement that is not a financial chain of life. It is after your case is discharged that you proceed without being crushed in debt, and you have complete control over your future earnings.
Myth#12: When I File, I Place My Spouse and Family in the Position of Being Liable for My Debts.
Reality Check: Your filing is your own bankruptcy; it does not necessarily presuppose your spouse, parents, or siblings. In case your spouse was not a co-signer to your credit card, loan, or other debt, he or she is not affected by your bankruptcy.
The assets and property of your family remain independent unless there is a direct connection with your debts.
It does not pull your loved ones to the ground; rather, it shields them by preventing legal suits, collections or joint financial burdens.
The Reason Why These Myths Persist in San Diego
- Stigma and shame: The cultural attitudes tend to compare debt and failure.
- Misinformation: Half-truths are spread by friends, relatives or even old Internet sources.
- Debt relief companies: There are predatory debt relief agencies that discourage bankruptcy, as these companies are making money off you.
Unfortunately, these myths keep people from exploring their legal rights and cost them years of unnecessary financial struggle.
Break Free From Debt Stress & The Myths That Make It Worse!
California has unique exemption laws that determine what you keep. San Diego also has one of the highest homestead exemptions in the country, which can protect homeowners from losing equity.
That’s why working with a local bankruptcy attorney who knows San Diego’s courts and rules makes all the difference.
At sandiegobk, we’ve helped countless locals navigate the process, protect what matters most, and finally breathe again. You can get the same (feel free to contact)!