Even with regular income, you may struggle with debt. To regain control of your finances, you may consider options such as filing for Chapter 13 bankruptcy.
Before declaring Chapter 13 bankruptcy, you may benefit from understanding some of the upsides and disadvantages of this debt relief option.
Making payments to recover
According to the United States Courts, Chapter 13 bankruptcy offers a path to financial recovery if you have regular income but still struggle with debt. Through this filing option, you suggest a repayment plan for your debts and pay them back over a specified period. While under Chapter 13 protection, you have no direct contact with your creditors. Rather, you make payments to your court-appointed trustee who then forwards the appropriate amounts to your creditors.
Stretching out the process
The Chapter 13 bankruptcy process takes between three and five years to complete. Depending on your monthly income and the applicable state median, you may stretch your repayment plan over three years or five years. With few exceptions, you will apply all your discretionary income toward paying off your debts during this time.
Through your repayment plan, you may retain a certain property. This may include assets held as collateral for debts and your home. Other bankruptcy options require you to liquidate the property for the repayment of your debts.
A prior Chapter 13 petition may affect your eligibility for future filings. You cannot file for bankruptcy if you had a petition dismissed in the past 180 days because you willfully did not appear before the court. Having a prior filing dismissed may also affect your eligibility if you dropped or the court dismissed the previous case because after your creditors pursued claims with the bankruptcy court.
Filing for Chapter 13 bankruptcy may provide much-needed relief from overwhelming debt. However, you should carefully consider the potential advantages and downsides before taking this step.