Don’t let misguided assumptions about Chapter 13 keep you from filing bankruptcy in Georgia. Mark A. Bandy is an experienced Georgia Bankruptcy attorney available to answer your questions.
Myth: Chapter 13 won’t save your home from foreclosure
This is the most highly perpetuated myth about filing Chapter 13 bankruptcy and it’s totally false.
Homeowners who are facing foreclosure often prefer filing Chapter 13 because it allows them to catch up on their mortgage payments and property taxes through a payment plan while they continue to live in their home. The automatic stay instituted by the court when you file your bankruptcy case prevents creditors like your bank or mortgage company from foreclosing on your home and even contacting you.
Myth: Filing Chapter 13 is a waste of time because you will have to repay all your debts anyway
Wrong! A Chapter 13 bankruptcy is executed as a repayment plan in which you will be required to make monthly payments toward your debts, but the payment amount is determined by the value of your assets, cost of your total debt, and most importantly, your disposable income. You will only pay back what you can afford over the three or five year period that the plan is in effect.
Myth: You must be broke or unemployed to file Chapter 13
It’s entirely possible that you might not have two pennies to rub together, but you can’t file Chapter 13 if you don’t have a job because you must have a source of income to make the monthly payments established in your plan. Remember that bankruptcy is designed to help you recover from crippling debt and to get you back on track financially. The courts won’t allow you to commit to a repayment plan that will cause you further financial distress.
Myth: You make too much money to file Chapter 13
This is incorrect. Chapter 7 is the only form of consumer bankruptcy that requires that you earn less than a certain amount of income. Since a Chapter 13 bankruptcy is set up as a repayment plan, you actually need to demonstrate that you have enough money to afford to make payments on time. The higher your salary is, the easier that will be to prove.
Myth: Filing Chapter 13 will prevent you from taking out a loan
Not true. Once your payment plan comes to an end, your remaining debts are discharged and you are free to apply for a loan as you like. The bankruptcy will remain part of your credit history for seven to 10 years, but most people are able to rebuild their credit in less than two years which makes it easier to secure a loan. If you need to take out a loan to pay medical bills or to replace an automobile while you are making payments in your plan, Mark can file a motion to request permission from the court. If the trustee handling your repayment plan doesn’t object, you can apply for the loan. It is in the trustee’s interest that you make your payments on time so if you need to purchase a car using a loan to get to work, he is less likely to deny your request.
Contact the Law Offices of Mark A. Bandy, P.C. for your free initial consultation!