If you cannot file for Chapter 7 bankruptcy protection because your income is too high, consider Chapter 13 as an option for resolving your mounting debt.
The foundation for Chapter 13 is a monthly payment plan, and it offers advantages you may not have considered.
The payment plan
Chapter 13 provides a way for you to repay your debts through a monthly payment plan that will continue from three to five years. You can work with your trustee if you need to stretch out or reduce your payments, and you can keep the property on which you are making those payments. You may also be able to pay less than the balance you owe on some types of personal property. During the time your payment plan is active, you will have protection against creditor harassment or wage garnishment.
In a Chapter 13 bankruptcy, you must pay your debts out of disposable income, which is any money remaining after you pay necessities such as food and shelter. Any extra income you have will go into your monthly payments for the life of the repayment plan. You will also have to continue meeting other obligations, such as your student loan payments, for example. However, Chapter 13 also allows you to catch up on arrearages if payments such as alimony and child support are overdue.
When you file Chapter 13 bankruptcy, you will lose your credit cards, but you may qualify for new credit within one to three years after filing, although you can expect to see a considerably higher interest rate. You should also be aware that Chapter 13 bankruptcy will appear on your credit report for as long as 10 years.
The way forward
Unlike Chapter 7 bankruptcy, which is only available for filing every six years, you can file the Chapter 13 petition as often as necessary, which is helpful if emergency situations arise. If you follow the rules of the court and meet your payment obligations on a consistent basis, Chapter 13 bankruptcy could be the solution to help you secure a brighter financial future.