The myths associated with filing for bankruptcy cover everything from asset liquidation to a damaged reputation. The problem with misconceptions about the process is that it hinders people from taking advantage of the benefits bankruptcy has to offer. When it comes to filing for Chapter 13, there are some common myths that often confuse or complicate the process unnecessarily.
Dealing With Debts
One of the biggest issues behind a Chapter 13 case that gets misunderstood is how the repayment plan is developed and managed. Most people assume that their income level is the only important factor in the repayment plan. This often leads to the concealment or unintentional absence of information that is vital for determining the repayment plan details. While income is used to determine how much a person may be required to repay, other funds, monies and property of value are also considered. This includes retirement funds, benefit monies and even one’s assets. However, the inclusion of these finances doesn’t necessarily mean they will be garnished for purposes of repayment.
Another common misconception about Chapter 13 is that it only deals with secured debts such as mortgages or car loans. While these debts take priority in a Chapter 13 plan, unsecured debts may also be included in the filing. Bankruptcy laws prevent preferential treatment among creditors, which is why all debts are to be listed in the filing. However, secured debt creditors do take priority in terms of repayment if the debtor intends to keep the property. In many cases, unsecured debts do get repaid in a Chapter 13 bankruptcy, but they may not always end up being paid in full. The debtor’s financial situation is what determines how much they will repay and which creditors will end up receiving payment by the time of discharge.
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