Is Chapter 13 a good solution for your debt concerns?


Battling debt can feel like a losing fight every day, casting a long shadow on your entire day from when you wake to when you fall back asleep. The longer that unmanageable debts drag on, the more difficult it is to get control of them and keep them from truly spiraling out of control. If you face debt that you cannot pay down effectively, it may be time to consider using bankruptcy to regain control of your finances and your life.

In broad terms, private consumers in America may discharge debt using either Chapter 7 or Chapter 13 bankruptcy, which offer fairly different benefits. Chapter 7 is more widely available, discharging debt in return for consumers forfeiting property that does qualify for exemption. Chapter 13, on the other hand, does not necessarily require those who use it to forfeit their property, but, rather, allows debtors to pay off their debts over time through a court-approved repayment plan.

Qualifying for Chapter 13

In order to qualify for Chapter 13, a consumer must have sufficient disposable income to repay his or her debts over time. This is a different threshold in each case, because no two debt burdens are exactly the same, and each person's ongoing expenses may vary significantly.

Once you assess all of your ongoing expenses that do count as luxuries, you can create a proposed repayment plan and present it to a bankruptcy court for approval. This plan typically lasts between three and five years, and accounts for all or most of your debt. While it is possible to discharge some debt through Chapter 13, its primary use is to repay debt with a structured plan for doing so, while enjoying freedom from collection tactics and keeping your property.

What property may you keep?

Depending on your debt burden, the nature of your income, and the extravagance or practicality of your lifestyle, you may not have to forfeit any property at all. It is likely, for instance, that you can keep you home, your vehicle, most of your personal possessions, and your savings and investments, as long as you have sufficient income.

However, if you have a number of luxury possessions, you have to forfeit some of them if you cannot justify their expense, especially if you still owe a balance on a luxury item. Because of the case-by-case nature of bankruptcy, it is not possible to know exactly what property you may or may not retain until you begin the process for yourself.

For many individuals, navigating bankruptcy is too complicated to take on by themselves. An experienced attorney can help guide consumers through the Chapter 13 process and ensure that their rights remain secure while helping identify important benefits they might otherwise miss. Take great care to understand this process in detail before you undertake your own bankruptcy so you can focus on moving forward productively in a new season of financial freedom.

Alexus Kearney