Should you file chapter 13 bankruptcy? The decision is very important as it impacts various aspects of your life now and in the future. For informational purposes, we are providing information. This is not legal advice and you should speak with a licensed attorney for legal guidance.

While you receive protection from your creditors in a Chapter 13 bankruptcy, your plan payment may not be flexible. If your income increases, you may be responsible for a higher repayment plan. Chapter 13 bankruptcy may also be very expensive if the court deems that you have disposable income in your Chapter 13 bankruptcy plan. For example, if you are in a 100% Chapter 13 plan, you may have to pay 100% back to your unsecured creditors in addition to the bankruptcy attorney fees and trustees fees.

Unlike a Chapter 7 bankruptcy, a Chapter 13 bankruptcy is for people who have income or assets above a certain level. Also called a wage earner’s plan, chapter 13 bankruptcy allows individuals with regular income to create a plan to repay all or part of their debts.

In a Chapter 13 bankruptcy the debtor, you, proposes a plan to repay your creditors in installments over the period of three to five years. Depending on your income, the court determines the length of the plan. During this repayment period, creditors are forbidden from continuing collection efforts.

Remember that the repayment plan is based on court mandated budgets that follow IRS guidelines, and the penalties for failure to pay are severe.

In order to be eligible to file Chapter 13 bankruptcy, you will need to have a stable income with disposable income each month or assets. This is very different from Chapter 7 bankruptcy where you are showing that you do not have any disposable income.

What Is Considered Disposable Income?

Disposable income is the money left over after you pay your basic life requirements like food, utilities, rent, etc.

In order to file for a Chapter 13 bankruptcy ,you cannot have more than $1,081,400 in secured debt. This includes any property or other assets that a creditor might take if you do not make payments. The amount of unsecured debt caps off at $360,475. Unsecured debt includes credit cards and any other type of debt that is not tied to real assets.

The cap on secured and unsecured debt a debtor can have changes to reflect Consumer Price Index adjustments.

The primary focus in a Chapter 13 bankruptcy case is the payment plan to creditors. The plan length is decided on by the court depending on your income, and no plans may exceed 5 years. Individuals who have the following usually file Chapter 13 bankruptcy:

• Home Mortgage or other loans they would like to bring current so that they do not lose the property.
• Tax debt, child support, student loans or any other type of debt that cannot be liquidated in a chapter 7 bankruptcy.
• Individuals that do not pass the means test for a Chapter 7 bankruptcy due to an excess of disposable income.

Like the Chapter 7 Bankruptcy, Chapter 13 Bankruptcy may stay on your credit report for 10 years starting from the date of filing. However, some creditors may only report the Chapter 13 bankruptcy for seven years.Creditors usually prefer to see a Chapter 13 bankruptcy over a Chapter 7 bankruptcy because the successful completion of the repayment plan means that you are at least paying some of your debt back, as opposed to the Chapter 7 bankruptcy where you do not pay anything back.

If you hire a lawyer, which is highly suggested, you will have to pay his/her fee. There are also some court fees for filing. You will have to take time off from work to appear in court at hearings and of course to meet with your lawyer to structure the case. So, you will have to invest some time. Ultimately, the cost will always vary.

Most people think that by hiring a lawyer and filing for Chapter 13 Bankruptcy, all stress is alleviated. But that is usually not the case. If anything, in many cases, a bankruptcy can cause more stress. Especially if there are assets involved.

We at CuraDebt have over 19 years of experience dealing with debt solutions for unsecured debts and IRS and state tax debt relief.

Debt settlement might be the answer for you. We do not know until we talk with you and take a look at your financial situation. CuraDebt is a top rated debt relief company. Our job is not to sell you on our program, but to help you figure out your best solution.

Let’s go over your situation and see if we can help.