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Debunking Three Popular Myths About Chapter 13

Experienced Atlanta attorneys clear up bankruptcy misconceptions

If you've been thinking about filing Chapter 13 bankruptcy, you've probably gotten mixed signals about how the process works, as well as the pros and cons. You've heard contradictory stories about how effective a solution it is. If you've tried other debt relief strategies that failed, you're certainly concerned whether a particular source of information on bankruptcy is trustworthy. At DebtStoppers, we want our clients to make the best-informed decisions they can. That's why we give each client individualized attention, providing in-depth debt analysis and sharing our practical experience from decades of bankruptcy proceedings. What follows is a brief list of frequently cited misinformation about Chapter 13 bankruptcy in Georgia.

Myth #1: The bankruptcy court dictates your repayment plan

Chapter 13 reorganizes the petitioner's debt for repayment under a court-approved plan, so many would-be filers assume the bankruptcy judge or trustee of the court writes the plan and imposes it on the debtor. Actually, you work with your bankruptcy attorney to create a plan you can live with. As long as you're truthful about your income, assets and liabilities, the court has every incentive to go along with your proposal. Saddling you with a harsh plan defeats the purpose of the bankruptcy proceedings, which is to allow you to keep your assets, while giving you a fair shot at a second chance.

Myth #2: The repayment plan means you repay everything

We hear from prospective clients all the time who ask, "Why should I file for bankruptcy if I'm going to be stuck paying off my debts?" That's not an accurate picture of the Chapter 13 reorganization. For many of our clients, paying off their debts could take decades, leaving them no time at all to plan for retirement. On the other hand, a Chapter 13 payment plan is for a short term, usually only three years, but in some cases up to five. Your monthly payment depends on your disposable income, rather than the sum you owe. So, on a three-to-five-year plan, you probably won't come close to repaying everything. Nevertheless, the bankruptcy court will discharge your remaining debt after you complete the terms of your plan.

Myth #3: Filing for Chapter 13 bankruptcy will ruin my credit rating!

It's certainly true that when you file for Chapter 13 or Chapter 7 bankruptcy, your credit score is going to drop. At first. Even so, many of our clients have already lost points because of their high debt-to-income ratio, so the hit they take from bankruptcy is negligible. On the plus side, many of our clients see a steady rise in their credit rating soon after filing, because their Chapter 13 bankruptcy plan brings their debts to current status. As they continue to make their regular payments, their score improves and lenders actually start extending credit again.

Don't put off getting help because of bankruptcy myths — Call DebtStoppers today!

Paralyzed by indecision? An Atlanta DebtStoppers attorney in can provide you with accurate bankruptcy information so you can make an informed choice. Call us at 404-796-7161 or contact our office online.