Is a Chapter 13 bankruptcy your best choice?

Deciding to file a bankruptcy is never an easy question. While you may want to fulfill all of your obligations, your finances may have gotten out of hand. If you have lost a job or change jobs, perhaps at a lower level of income, your cash flow may no longer support all of your obligations.

If you have suffered  medical problems, your situation may be even worse. You could be racking up medical bills, with little or no insurance, and because of your medical problems, you may be unable to work or have limited income. 

This may make a bankruptcy your best economic choice. If you own a home or have equity in the home, a Chapter 13 may make the most sense. While it takes longer than a Chapter 7, it allows you to restructure your debt into a manageable format, and can enable you to regain your economic health.

A Chapter 13 typically lasts three to five years. During that time, you make your plan payments to the Trustee, who then pays your creditors. The plan is the centerpiece of a Chapter 13. Its payments are based on your income minus your necessary living expenses.

That money is used to pay your secured debts and the remainder goes towards your unsecured debt. During the five-years of the plan, you are protected from creditor harassment, which can be a relief after weeks or months of being subjected to the never-ending onslaught of collection calls and letters.

Because a Chapter 13 takes years to complete, a steady income is necessary. You should discuss with your attorney any issues you may have with the stability of your income, because if you fail to make your plan payments, the Trustee might move to dismiss your bankruptcy.

Investorplace.com, “Should I File for Chapter 13 Bankruptcy?” Jessica Whitmore, February 17, 2015

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