Chapter 13 Bankruptcy Myths – Part 1

There are many misunderstandings about filing for Chapter 13 Bankruptcy. Below we note five of the common myths about filing for Chapter 13 Bankruptcy in Maryland.

Myth #1: Most people don’t qualify for Chapter 13 Bankruptcy.

Misleading! While there are debt limits to qualify for Chapter 13, they are high and only preclude individuals in a few scenarios. Debt limits change every 3 years and are due for revision in April (2022). Currently, for unsecured debts like credit cards, tax debts or child support payments, the limit is $419,275 and for secured debts, like mortgages and car loans, it is $1,257,850. If you are below these limits and have regular income – social security and pensions included – you likely qualify.

Myth #2: I’ll lose my house if I file for Chapter 13 Bankruptcy.

False! Chapter 13 is utilized to save your home with a 3-to-5-year period to catch up on mortgage payments. As long as the mortgage is current, your house is secure. Often, a second mortgage is eliminated in Chapter 13 by a “strip off” procedure.

Myth #3: Creditors must approve my Chapter 13 plan.

No! As long as the Bankruptcy Code criteria is met, creditors cannot prevent a proposed plan from being confirmed by the Bankruptcy Court. Secured creditors are allowed to object if the plan does not properly address their claims, but the final decision belongs to the Bankruptcy Judge who will base his or her decision on the Bankruptcy Code requirements.

Myth #4: I can’t sell my house for five years or more.

Wrong! You may sell your house at any time. There are certainly additional steps you must take, but so long as your proceeds are distributed in line with your Chapter 13 plan, it is only in rare cases that a sale would be prevented.

Myth #5: A Bankruptcy Trustee will oversee my life.

Misleading. A trustee will of course be assigned to your filing, but they are not expected to interfere with your life. Once your plan is approved and your payments are made in full and on time, it is unlikely you will have further dealings with your Bankruptcy Trustee. Only in cases where there is a change of circumstances is there any likelihood of scrutiny.

We hope we have corrected any misconceptions you may have about filing for Chapter 13 Bankruptcy in Maryland. Our Maryland Chapter 13 attorneys can answer any additional questions about Chapter 13 or other Bankruptcy options. Contact Sirody & Associates for a free consultation today.