Chapter 13

Chapter 13 bankruptcy is known as a reorganization bankruptcy. This type of bankruptcy is used by 25% of the consumers. When consumers filed Chapter 13 bankruptcy they usually want to pay off their debts over a three-five year period. This type of bankruptcy appeals to those who have non-exempt property that they want to keep. The amount of repayment can range from as little as 10% to 100% depending on the debtors income and the amount owed.

To qualify for Chapter 13 an individual may not exceed $250,000 in unsecured debts and $750,000 in secured debts. The payments are made to the secured creditors first based on their interest and priority.

When Should You Consider Chapter 13

1. If you are behind on your mortgage and need to catch up or you owe the IRS.
2. If the assets you want to protect would be liquidated under a chapter 7 and your disposable income is to high to qualify for a chapter 7.
3. If you need relief from collection proceedings or if you wish keep your obligation to pay your creditors and need some breathing room.
4. If you wish to leave the option of filing a chapter 7 at some time in the future. If you are a farmer who does not qualify for chapter 12 and have debt unrelated to farming.
5. You filed chapter 7 sometime in the past 6 years. You have a co-signer. If you could pay your debts within 3-5 years.

Downfalls to Bankruptcy

As tempting as filing for bankruptcy sounds, it still has its downfalls. There are many negative consequences that you will face.

1. Your credit will be ruined for the next ten years.
2. It can also hinder your ability to get a job.
3. You will not be able to establish new credit.
4. You will be unable to get insurance.
5. It will be difficult to find someone who will rent to you.
6. You have to pay court, attorney and filing fees upfront.

Alternatives to Bankruptcy

There is no easy way out when it comes to clearing your debt but bankruptcy doesn’t have to be the answer. There are other means in which to clear your debt and start anew.

1. You can try to deal with the creditors yourself and come up with a payment plan.
2. You can try to budget your expenses and live a more frugal lifestyle.
3. Take on a second job.
4. Contact a debt consolidation or credit counseling service.