Social myths about bankruptcy are so persistent and popular that many people believe them without question. Unfortunately, that may leave a significant number of people cut off from the benefit of bankruptcy. They may inaccurately believe, for example, that only people with relatively low incomes qualify for bankruptcy protections.
The reality is that anyone can wind up in overwhelming debt. In fact, those who have higher incomes may feel more pressure to spend beyond their means to maintain appearances. The government understands this, and there is a bankruptcy option even for those with higher incomes or substantial personal assets, such as a home.
While Chapter 7 bankruptcy has an income limit, Chapter 13 bankruptcy can work for individuals of any financial status and background. That's one reason why this form of bankruptcy is often referred to as a wage earner's plan.
When you restructure debt, the court typically won't seize your assets
Another persistent myth about bankruptcy is that the courts will take your assets and possessions. However, only in certain cases can the courts liquidate your assets to repay debts.
Even if your income level allows you to qualify for Chapter 7 bankruptcy, you may still want to pursue Chapter 13 instead. This is because the bankruptcy courts have the right to seize your personal assets to repay creditors in Chapter 7 bankruptcy. There are exemptions that you can use to retain some of your property. However, many valuable assets could wind up liquidated to pay your debts. After that liquidation process, the courts then move through the process of discharging the remaining debts.
In Chapter 13 bankruptcy, you negotiate new repayment schedules with your creditors. The courts assist in this process, and after a set period of time, the remaining debt receives a discharge. Unlike in Chapter 7 bankruptcy, Chapter 13 proceedings typically will not require the liquidation of any assets, except for extreme cases.
Chapter 13 bankruptcy lets you get back in control of your life
When you live paycheck-to-paycheck, trying to balance your daily needs with the need to repay your creditors, finances will undoubtedly become tight in your household. You will also likely experience extreme levels of stress and ongoing financial worry.
When you file for Chapter 13 bankruptcy, you still uphold your word by continuing to pay on your debts. More importantly, you put an end to aggressive collection activity and put yourself back in control of the debt. Instead of living a life full of worries, you simply need to abide by the repayment schedule as organized by the courts and focus on rebuilding your credit when the process is over.
For those in Maryland with significant amounts of debt, Chapter 13 bankruptcy could offer a fresh start and invaluable peace of mind.