The SmarTroop Blog

Chapter 13 bankruptcy is often called the “wage-earner’s plan.” Under Chapter 13, you work out a repayment plan, subject to court approval, that allows you to pay back some or all of your debts within three yearswithout giving up property. A Chapter 13 plan can be stretched out to five years if a judge can be persuaded to allow it.

In general, bankruptcy is a legal procedure that:

• Gives consumers who can’t possibly pay back all their debts the opportunity to wipe them out and start over.
• Helps people who are having a difficult time paying their bills the chance to work out a reasonable repayment schedule and pay off part or all of their debts under the supervision of the court.
• Prevents creditors from stripping an individual or family of all their assets when they can’t pay their bills.
• May offer some breathing room for someone who is facing wage garnishment, a repossession, utility disconnection, foreclosure or eviction, and needs time to work out a reasonable schedule for repayment.

Before Filing for Bankruptcy

Bankruptcy is a serious financial step, and we do not recommend you file for bankruptcy until other options have at least been examined. We frequently hear from people who declared bankruptcy and now feel like financial failures: They can’t get credit, their applications to rent apartments or homes are consistently declined, they find it difficult to travel or write checks because they don’t, have a major credit card, etc.

Some of these people complain that they were never really told about all the consequences of filing. Most were simply told that bankruptcy is an easy way to “start over again.” One woman told me that her bankruptcy lawyer told her that she would be considered a better credit risk after filing, since she would no longer owe anyone any money.

Before deciding to file, you should also try to find a decent lawyer who can explain the pros and cons of both types of bankruptcy. Beware of someone who only tries to sell you on how wonderfully easy bankruptcy is and what a perfect solution it offers to all your problems.

This entry was posted on Tuesday, October 28th, 2008 at 9:15 am and is filed under Credit Repair, Finance + Capital, Loan Parlor. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.