When you are struggling with debt, filing for bankruptcy might seem scary. However, it is a powerful financial tool that can offer you relief.
Chapter 13 bankruptcy could offer a way to catch up on payments you missed while potentially keeping your assets intact. However, despite its potential benefits, misconceptions surround Chapter 13 bankruptcy.
Below are common myths surrounding it, as well as the facts behind them.
Myth 1: You may lose all your assets
One of the biggest fears about bankruptcy is losing everything they own. Fortunately, Chapter 13 bankruptcy could help you keep your assets while repaying your debts.
Unlike Chapter 7 bankruptcy, which may require liquidating assets, Chapter 13 lets you create a plan to repay your debts. This plan usually lasts three to five years and lets you catch up on missed payments while keeping your property. Your home, car and other valuable possessions could remain safely in your hands.
Myth 2: It will negatively affect your credit forever
While bankruptcy may impact your credit score, it is not a life sentence. Chapter 13 bankruptcy only stays on your credit report for seven years from the filing date.
To help rebuild your credit, you may start by making timely payments under your Chapter 13 plan. This may help you improve your credit score even before bankruptcy falls off your report. Good financial habits post-bankruptcy can go a long way in restoring your creditworthiness.
Myth 3: You cannot file for bankruptcy if you have a job
You may believe that having a steady income disqualifies you from filing for bankruptcy. This may not be necessarily true for Chapter 13.
Chapter 13 is a “wage earner’s plan” because it benefits regular-income individuals. Your job does not disqualify you; it helps you qualify for Chapter 13. The steady income allows you to make payments under the repayment plan.
Filing for Chapter 13 bankruptcy may help you regain control of your finances while protecting your assets. If you are considering this option, you may want to consult a bankruptcy attorney to understand if it is a viable option for your specific situation.