People who struggle with insurmountable debt may want to consider Chapter 13 bankruptcy. However, with the benefits gained from filing for Chapter 13 comes severe restrictions.
Thousands of people every year accomplish debt relief. According to the United States Courts, approximately 283,000 people resolved their Chapter 13 cases in 2019. However, keep reading to learn a few mistakes people make when filing for Chapter 13 bankruptcy.
Save your money for debtors
Though you may have good intentions, do not pay off friends and family within one year of filing for bankruptcy. Creditors have entitlement to your money first. Paying off your close associates may put them in a difficult situation, as the courts may order them to pay the money back.
Do not spend credit
Chapter 13 is not an opportunity to run up your credit. You may not qualify for Chapter 13 if courts see a substantial credit increase within 90 days of filing. In the worst-case scenario, you risk a charge of bankruptcy fraud.
Keep your retirement accounts
Your retirement accounts such as 401(k)s and IRAs are exempt from bankruptcy claims. Debtors cannot use your tax-exempt funds to pay off debts, but it is no longer exempt from credit payments if you take out any money.
Inform your debt collectors
Creditors stop calling you after you file for bankruptcy. However, you must inform them of your decision. Otherwise, they still might hassle you. Debt is stressful enough, so take advantage of any benefits you receive from the process.
Debt can seem like an impossible problem to solve. However, people take steps towards managing their debt every day. It only takes consistent application over an extended period. Do not expect an overnight solution.