A Chapter 13 Bankruptcy is Challenging but Doable

English: Part of Title 11 of the United States...

English: Part of Title 11 of the United States Code (the Bankruptcy Code) on a shelf at a law library in San Francisco. (Photo credit: Wikipedia)

Some of the more popular questions on bankruptcy forums concerns the complexities of filing for Chapter 13 bankruptcy protection. A Chapter 13 bankruptcy is challenging but doable.

Filing and completing a successful Chapter 13 is much harder than filing and completing a Chapter 7. It has been estimated that up to 90 percent of Chapter 13 cases filed have been failures, but many of those statistics are skewed because a Chapter 13 is often converted into a Chapter 7 bankruptcy.

What is a Chapter 13 Bankruptcy?

A Chapter 13 is a type of bankruptcy codified under Title 11 of the United States Code that allows individuals to undergo financial reorganization supervised by a federal bankruptcy court.

Often called the Wage Earner’s Plan, a Chapter 13 enables income-receiving debtors to submit a plan for a bankruptcy court approval to pay back part or all of their debts over a 3 or 5 year plan.

The payback plan is determined by the amount of disposable income a wage earner has left over after paying normal and allowable living expenses. Any non-exempt unsecured debt not paid out over the plan time frame is discharged.

Things a Filing Debtor Should Know to Make a Chapter 13 Doable

Here are a few things a filing debtor might learn to do and not do in order to help him or her have a successful Chapter 13 filing:

  • Do not try to keep assets you really cannot afford. An advantage of a Chapter 13 over a Chapter 7 bankruptcy is that you can keep all of your assets without fear of them being liquidated, that is, if you can afford them. A successful Chapter 13 forces you into a budgeted plan that allows you to keep the assets most necessary and affordable.

  • Do be willing to make any adjustments necessary to live within your means. Things change, especially within a 3 or 5 year time frame. New jobs, pay raises, loss of income, illnesses, and a host of other things can change your plan. Be willing to make the adjustments necessary to complete your plan. The end result is a debt free life and worth the effort.

  • Do educate yourself about about the bankruptcy process. There seems to be a direct correlation between understanding the bankruptcy process of a Chapter 13 and successfully completing the process. For some strange reason, the old adage, “ignorance is no excuse in the eyes of the law,” seems to have great significance to bankruptcy filers. There are a number of bankruptcy forum websites that can provide you with valuable free information about the bankruptcy process.

  • Do seek a bankruptcy attorney that will help you get a reasonable plan confirmed. Educating yourself about the bankruptcy process will help you select an attorney in which you have confidence. Most bankruptcy attorneys will give you free consults to see if they can be of any service to you. Use as many consults you need to find the attorney you are most comfortable. Bankruptcy attorneys who have worked in a bankruptcy district for a long time often know the ins and outs of success in the district they work.

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