When you are drowning in credit card debt, medical bills, or other debt, you need help. One option is Chapter 13 bankruptcy. This is a great option, but before you consider it, it’s essential to debunk some common myths about Chapter 13 bankruptcy.

Misconception #1: Chapter 13 is Only for the Wealthy

Do you think Chapter 13 is only for those with high incomes? This is false. People from various income levels can benefit from this debt repayment plan. To file Chapter 13, you just have to meet the eligibility requirements, including:

· You’re not a business entity.

· You didn’t discharge debts in a Chapter 13 bankruptcy within the last two years or in a Chapter 7 bankruptcy within the previous four years.

· You completed the required credit counseling.

· You have less than $465,275 for unsecured debt and $1,395,875 for secured debt. It should be noted that the CARES Act provided increased debt limits to qualify for relief under Chapter 13, along with other benefits, but those provisions sunset on June 21, 2024.

· You filed your income tax returns for the previous four years.

· Your proposed repayment plan covers all required debts.

· You can repay a certain amount of debt to unsecured creditors.

· You have a high enough income to pay your debt obligations.

Misconception #2: Chapter 13 Will Ruin Your Credit

While it’s true that filing for bankruptcy will negatively impact your credit score, a Chapter 13 bankruptcy generally has a less severe impact than a Chapter 7 bankruptcy. And it’s important to note that this is just a temporary impact. Usually, after about 7 years, your credit score will rebound.

Misconception #3: Chapter 13 Will Permanently Stop Foreclosure

If you’re filing for Chapter 13 bankruptcy in hopes of avoiding foreclosure and keeping your house, it’s essential to understand that while in almost all situations it will stop a foreclosure, it isn’t always a permanent fix. While Chapter 13 can help halt foreclosure, it’s essential to seek advice from a bankruptcy attorney early to explore your situation and your options, including working with your mortgage lender.

Misconception #4: You Lose Everything During Chapter 13 Bankruptcy

Are you avoiding filing for Chapter 13 bankruptcy because you don’t want to lose your assets? In most cases, Chapter 13 does not require liquidating assets. However, there are exceptions, such as luxury assets or those not exempt under state bankruptcy laws. Typically, Chapter 7 involves liquidating assets to repay debts. And even then, your bankruptcy attorney can help you make most assets exempt, allowing you to maintain possession of them.

Misconception #5: Chapter 13 Is Only for People with Unsecured Debt

While one of the most common uses of Chapter 13 bankruptcy is to eliminate credit card debt and other unsecured debt, it can also be useful for those with secured debt – like mortgage payments and car loans. Each Chapter 13 bankruptcy case is unique and must be handled accordingly. A trusted and experienced bankruptcy attorney can help you take inventory of your debt and determine the best option to address it.

Misconception #6: Chapter 13 Is Too Complicated

One of the most common myths we hear at our office is “Chapter 13 is too complex.” Yes, there are a lot of requirements that must be met with a Chapter 13 bankruptcy, and while it involves creating a repayment plan, getting it approved, and working with a court-appointed trustee, it doesn’t have to be complicated. When you work with our experts at the Law Offices of Alexzander C.J. Adams, we can help you navigate the process and make informed decisions for your specific financial situation.

In conclusion, Chapter 13 bankruptcy can be a valuable tool when struggling with debt. By understanding the common misconceptions about this process, you can decide whether Chapter 13 is right for you.

Let Us Help You

If you have questions about filing for Chapter 13 bankruptcy, let our lawyers at the Law Offices of Alexzander C.J. Adams, P.C., help. We work for you, the people, and not institutions. Contact us for a free case evaluation or no-obligation consultation. We are dedicated to helping you overcome this minor bump and get on with your life.