Is Chapter 13 Bankruptcy Right for You?

There are some instances where a debtor will be better off filing for Chapter 13 bankruptcy. It is critical that you speak with an attorney to explore all of your options and determine which avenue is the right one for you to pursue. While Chapter 7 wipes out most debts and the other requires you to pay back a portion of your debt, there are still several instances where the latter is the right course.

Sometimes, a person is simply not qualified to file for Chapter 7. For instance, you will not be able to pursue this option if your income over the last six months is more than the average median income for a household your size in your state. Also, you will eligible if the amount of disposable income you have exceeds certain limits allowed by the law. This is after subtracting certain kinds of expenses and monthly debts you would have to pay back in Chapter 13 bankruptcy.

This second test can be extremely difficult for the layperson to understand and is one of the other reasons why you should never make this sort of decision before consulting an experienced attorney. The federal government has its own definition of expenses, monthly income and disposable, and this can differ substantially from your state government’s definitions. The federal government’s definitions can also make your income seem higher.

There are several instances where Chapter 13 bankruptcy is the preferable option. For example, if you cannot keep up with your car or mortgage loan and you want to make up missed payments over time, you can only do so through this method. You can also pay off student loans, tax obligations, and other debts over time.

You can also go this route if you can show the court that you are sincere in your desire to repay your debts. You may be under pressure from creditors or you work better under this method’s deadlines and more formal structure. If you have non-exempt property that you want to keep, you won’t have to give it to the trustee. You would simply repay your debts out of your income. Another reason this method may be better for you is if you have a co-debtor on your personal debt. He or she would be left alone for that debt as long as you keep up with the payments you arranged on your plan.

It is, once again, critical that you take your time and thoroughly consider all of your options when deciding which route of bankruptcy is right for you. An experienced attorney who has your best interests in mind will be of invaluable help. You need to remember that the choices you make now will have long-term ramifications, so make sure they are well thought out.