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Why Chapter 13 Bankruptcy May be the Right Fit for You

While a Chapter 13 bankruptcy won't discharge your debts, it allows retention of all property. Today we discuss what makes someone a good candidate for Chapter 13.

On Behalf of Veitengruber Law | Jun 23,2022

Generally, Chapter 13 bankruptcy is a good option for those struggling with significant debt but have sufficient income to conceivably pay back the debt. The main feature of Chapter 13 bankruptcy is a structured repayment plan that sets the debtor up for success in repaying past-due bills and defaulted debts within a specific time frame.

While you cannot discharge any debt under Chapter 13, you will be able to retain all your property and belongings. Not sure if you're a good candidate for Chapter 13? A good jumping-off point is determining whether you meet the following criteria.

1. You have a secure job with a regular income.

Depending on your income, you may not be able to pass the Chapter 7 means test to qualify for a bankruptcy discharge of debts. Chapter 13 does not require you to pass a means test. Instead, the courts will use your income to determine how much debt you can reasonably afford to pay back each month as well as the length of your repayment plan. You will also need to prove that you have the income available to manage the repayment schedule.

2.   You want to protect your property.

Unlike in a Chapter 7 bankruptcy, Chapter 13 doesn't require you to liquidate assets to pay back lenders. As a result, you will be able to keep your home and other property. Entering into Chapter 13 bankruptcy can also help you stop a foreclosure. If you are in default on your mortgage, this debt can become part of your repayment plan, allowing you to catch up on your mortgage and keep your home.

3.   You can afford to continue paying bills while repaying debt.

YOU MUST be able to stay current on your ongoing monthly bills while also keeping up with your newly rescheduled debt payments. While it is possible to modify your repayment plan (at a later date) if it's not working for you, there are no second chances for missed payments. If you miss a scheduled bankruptcy payment, you could lose the very same assets you were trying to protect.

4.   You want to protect your credit score.

No matter what kind of bankruptcy you go through, your credit score will take a hit. However, the consequences of a Chapter 13 bankruptcy are slightly less damaging than other kinds of bankruptcy because the goal is to pay off most or all of the debt. In addition, your Chapter 13 bankruptcy will only stay on your report for seven years (instead of ten years for Chapter 7).

Chapter 13 is an excellent option if you are struggling with debt and want to protect your assets. If you can afford the monthly payments, a restructured debt repayment plan can help you get ahead of your debt and back onto much more solid financial footing. If you need help deciding which debt resolution plan is best for your unique situation, Veitengruber Law can help.




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