Many people who have no income but a lot of debt will decide to use bankruptcy to get rid of their debt. This is known as Chapter 7 bankruptcy, and it simply liquidates non-exempt assets.
But say that you still have a fairly good income, but it’s just not enough for you to pay off all of the debt that you have at the moment. Is there a way that you can still use bankruptcy? Or are you going to be disqualified on account of your own earnings?
The benefit of Chapter 13
What you may want to do is simply consider a different type of bankruptcy, known as Chapter 13. This is often called a wage earner’s plan. It is designed specifically for people who are in your situation, and you can qualify for it even if your wages are too high for you to qualify for Chapter 7.
If you do file for chapter 13 bankruptcy, it creates a repayment plan. This is essentially just the consolidation of a lot of your debt. You then have to make monthly payments to try to eliminate that debt over time.
This can take three to five years, but you eventually get through those payments and you’re in a better financial spot. Your debt becomes affordable because you have so long to pay it and you just make small installments, rather than having to try to tackle all the debt at the same time.
If you do decide to file for bankruptcy, it’s important to know what type to use and all the legal steps to take to get the process underway.