All too often, we hear one bad review of a movie, book, or show and decide not to go with it. This too happens with bankruptcy. Bankruptcy law is very complex on paper, but many myths can be dispelled. This blog guide focuses on myths involving Texas Chapter 13 bankruptcy
Myth, You Have to Be Broke
You do not have to be broke at all to file bankruptcy. In fact, you want more money if you file Chapter 13. If you have no money, Chapter 7 is a much better option, and you will likely be eligible unless you make a lot. But in Chapter 13, you need only prove you need legal protection for property and assets. The point is that you are paying on debts; you can have some money or lots of money and still file. You can stop the problem months before it become a financial collapse, at a time when you have more money but know it won’t last.
Myth, You Will Lose Your Home
Chapter 13 bankruptcy puts an automatic stay on all collections and foreclosures. There is some truth here, as you might lose your home. If you cannot pay on the home, or if you wait too long, you may lose it to foreclosure. An automatic stay stops collections for several months, but it cannot stop a foreclosure started before you filed. What it can do is provide you months protection, then give you the opportunity to repay the debt in manageable installments if you file early enough.
Myth, Spending Retirement Savings or 401K is Better
Spending your nest egg is a bad idea. You are only buying yourself a few months to a years time when you can stop the problem at its source. If you have no money at all, Chapter 7 may better discharge your debts. If you are working and have some income, Chapter 13 makes it so you can afford to make some reasonable payments.
Myth, Your Credit Will be Ruined
Your credit will be hurt, not ruined. You can rebuild it. If everyone in Texas who filed bankruptcy could no longer buy a car, rent an apartment, buy a home, or get a student loan, there would be some big problems. Yes, you may have some high interest rates, you may get turned down a few times. The trick is to continue trying until you get results.
Myth, Creditors Will Stop the Bankruptcy
Your creditors do have rights. They can ask for a lift of an automatic stay. But in Chapter 7, they rarely have much say. In Chapter 13, they are getting the majority of the money owed them, if not all. As long as you stay within Texas bankruptcy law, you will be fine.
Myth, Lawyers Always Overcharge You
Bankruptcy lawyers charge some of the lowest rates in the business. You get charged with a felony, a good lawyer will cost you a lot of money. In bankruptcy, you are filing because you lack proper funds, not because you are rich. Therefore, lawyers charge minimal rates. The good ones may charge more, but when you compare it to the benefits of a successful Chapter 13 filing, such as stopping a foreclosure, it’s more than worth it.