Interviewer: What are some common misconceptions about Chapter 13 bankruptcy that people may have?
People Filing for Bankruptcy Are Generally NOT Trying to Defraud Their Creditors
Court Koehler: A number of the same misconceptions that you have with your regular bankruptcy or just bankruptcy of any kind apply to the Chapter 13. A common misconception is that it’s only for people who are trying to defraud their creditors. Or, that it’s for people who are being lazy and they just want to give up paying bills. That’s a misconception.
A Chapter 13 Bankruptcy Allows Individuals to Repay Some of Their Debt
Many people find themselves in financial difficulty, and Chapter 13 bankruptcy is one way that you can get yourself back on your feet—while repaying your creditors at least a portion of what you owe them. In some ways it can be a little bit less damaging to your creditors to do a Chapter 13 as opposed to a Chapter 7.
A Chapter 13 Bankruptcy Can Be Discharged in 3 to 5 Years
Also, another misconception that I see is that people assume it will take a great number of years to go through the Chapter 13 payment plan. It does take a period of between three to five years to go through the plan, but it doesn’t last any longer than that.
The payments are set up according to your budget and according to what you owe. We try to find a payment plan that you can afford, that you can get yourself straightened out financially—without saddling you with an unbearable financial burden. It is a misconception that it is going to take you a very long time or that it’s going to be really hard to come up with the payments financially are not necessarily true.
You do have to put a good portion of your income towards your Chapter 13 plan. Like I said earlier, the plan is crafted with your income and your expenses in mind, and it’s designed so that you can fulfill your obligations and be able to come out on the other side of a fresh financial start.