Bankruptcy has an unfairly negative reputation. Far from being evidence of personal failure or irresponsibility, it is, instead, a way for an individual to take responsibility for their situation and make improvements for the future.
Bankruptcy offers critical protection to citizens who find themselves financially overextended. Even the most responsible adult who makes an excellent wage can find themselves struggling with debt. Just because you have significant assets or make a good salary doesn't mean you don't have options.
The idea that bankruptcy is only for the truly indigent is another common misconception. Bankruptcy can help anyone, which is why there are several kinds of bankruptcy filings that offer different protections. After all, those with higher incomes often have higher overall levels of debt that they carry, too, as they must maintain a higher standard of living.
Chapter 13 bankruptcy allows you to renegotiate your existing debt
One of the big issues with carrying debt is that you don't set the terms when you borrow money. The lenders have all the power in a credit card or medical financing scenario. The terms may not seem so bad initially, but you may eventually come to realize that they are not in your favor.
Those high interest rates and ridiculous fees start to add up and leave you struggling to make your payments or diminish your overall balance. Chapter 13 bankruptcy does not involve the immediate liquidation of that debt. Instead, you work with the courts and your creditors to establish a more reasonable and fair repayment plan. Reduced interest rates, the forgiveness of certain fees or the consolidation of accounts are all possibilities when renegotiating your various debts.
You can create a repayment plan and send money every month directly to the court. The courts will then distribute those funds to your individual creditors. After you complete the repayment plan for a specific amount of time, typically three years for most Chapter 13 cases, the remaining balance on unsecured debt receives a discharge. However, secured debts, such as your mortgage or car loan, will still require repayment.
Chapter 13 bankruptcy puts you back in control of your finances
When your debt situation gets out of control, whether it's medical debt or credit card bills, you may find yourself in a situation where you can barely cover your expenses, let alone plan for the future. Filing for Chapter 13 bankruptcy gives you an opportunity to reduce your monthly payments and balance out your household finances.
Chapter 13 bankruptcy is a great option for those in Maryland with significant assets, as they will not need to liquidate their assets. It is also a good option for those who want their credit to return to normal faster.