Debt Settlement or Chapter 13 Bankruptcy

Debtors, who have assets and an income that is more than the mean average for their state, may not be able to file for Chapter 7 Bankruptcy, but may, instead be required to file Chapter 13 Bankruptcy.

Chapter 13 Bankruptcy, known as the wage earner’s plan, is the second bankruptcy available to individuals. It enables individuals with regular income to develop a plan to repay all or part of their debts.

Under Chapter 13 Bankruptcy, debtors propose a repayment plan to make installment payments to creditors over three to five years. If the debtor’s current monthly income is less than the applicable state median, the plan will be for three years, unless the court approves a longer period “for cause.”

If the debtor’s current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years.

This personal bankruptcy story was posted on the internet in May of 2011: “If I do not qualify to file for Chapter 7 Bankruptcy, how can I decide if I should file Chapter 13 Bankruptcy or if I should attempt debt settlement? I may be able to get creditors to settle for 25% or less. Will Chapter 13 Bankruptcy significantly reduce the amount of debt I owe?”

This debtor asks the obvious questions which all debtors should consider before filing for Chapter 13 Bankruptcy. Debt settlement is a legitimate way to deal with your debts, but most debtors find it hard to negotiate with creditors.

Filing for bankruptcy gets your creditors to the negotiating table fast. Unsecured debt, even in Chapter 13 Bankruptcy, can be fully forgiven. Creditors know this and don’t want to wait to potentially get a fraction of what they are owed.

Many creditors don’t file claims to the trustee, who is responsible for the financial dispersion of the plan. When they don’t file a claim, they lose the opportunity to recover their debt. Every debtor must weigh these issues before deciding if they should use debt settlement to negotiate their debt.

Some bankruptcy lawyers will provide debt settlement services as part of their contract negotiations to file bankruptcy. They will try debt settlement first. If successful, the client usually saves the filing fees associated with bankruptcy, but if unsuccessful, the lawyer will file the bankruptcy on behalf of the client.

Filing for Chapter 13 Bankruptcy can be an affordable way to negotiate debt payments to your credits. It allows debts to be paid over a specified time. It protects your assets and prevents unfair collection actions.

Bankruptcy laws can be complicated and you may need legal help from a bankruptcy lawyer. If you need relief from the stress of debt and you live in or around the metropolitan area of Orange County, California, contact us at .We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.

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