When considering different debt repayment solutions, Chapter 13 bankruptcy often attracts people as a relatively safe solution. But with this type of filing, specific goals must be met. As one of the top reasons to avoid Chapter 13, these conditions often go unnoticed in the investigation stage. Taking a deeper look into Chapter 13 bankruptcy allows us to determine whether it is the right avenue.
When weighing the options that the different types of bankruptcies can offer, understand that debt counselors will recommend Chapter 13 to anyone who owns a leverage asset, such as a home. As well, for a debtor with back taxes or assets that have a lower value that what is owing against them, Chapter 13 will also be the avenue of choice. Typically, Chapter 13 allows the debtor to repay a portion of the debt, rather than the debt in full, provided the debtor can prove sufficiently that he cannot repay the full amount.
With the retention of non-exempt assets being such a big benefit, Chapter 13 appears to be a great alternative to Chapter 7 bankruptcy or to having to repay the full amount owed. Since debtors can file Chapter 13 every four years, it seems like a short-term commitment. However, the Chapter 13 repayment plan normally lasts for as long as three to five years, during which time debtors repay their debt based on an agreed upon schedule. At the end of this plan, the creditors write off the balance provided the debtor maintained his end of the bargain. Sounds like a great debt management solution. But it often is not.
One of the top reasons to avoid Chapter 13 is that debtors must meet certain eligibility requirements. This begins with having a steady income, which excludes people who might really benefit but who are currently unemployed and having trouble making ends meet. Often, people with this type of debt problem had arrived there as a result of the lack of income. The irony is that most debtors with a steady income would have repaid the debt in full. More interesting is that the Chapter 13 means test requires that a debtor's income exceed certain thresholds in order to be eligible for this option. Go figure.
Another one of the top reasons to avoid chapter 13 is that it can bring your lifestyle under a court mandate. While many people are okay with that kind of regulation over their lives if it helps those clear debts, some debtors feel hopelessly trapped when told where to live, how to travel, what food to eat... Remember, once you file for chapter 13, the court and trustees have the right to look at the minutest details of your income and expenses and order changes that they deem fit.
To clear the loan from your income you will need to forfeit any unexpected profits that come your way during the time chapter 13 is in force. Suppose you are gifted or willed a new car or make unexpected profits from a side business, the asset might be forfeited toward payment of your loan. Top reasons to avoid chapter 13 also includes the fact that your spouse may also be asked to provide detailed reports of their assets, income, and expenses, even if you don't file for bankruptcy jointly.
Prior to filing Chapter 13 bankruptcy, debtors would be best served by creating their own, profession budget and repayment plan, especially if they have the means to do so. This not only enables the debtor to keep his financial circumstances out of the public domain but will actually improve his credit rather than ruin it. - 29866
When weighing the options that the different types of bankruptcies can offer, understand that debt counselors will recommend Chapter 13 to anyone who owns a leverage asset, such as a home. As well, for a debtor with back taxes or assets that have a lower value that what is owing against them, Chapter 13 will also be the avenue of choice. Typically, Chapter 13 allows the debtor to repay a portion of the debt, rather than the debt in full, provided the debtor can prove sufficiently that he cannot repay the full amount.
With the retention of non-exempt assets being such a big benefit, Chapter 13 appears to be a great alternative to Chapter 7 bankruptcy or to having to repay the full amount owed. Since debtors can file Chapter 13 every four years, it seems like a short-term commitment. However, the Chapter 13 repayment plan normally lasts for as long as three to five years, during which time debtors repay their debt based on an agreed upon schedule. At the end of this plan, the creditors write off the balance provided the debtor maintained his end of the bargain. Sounds like a great debt management solution. But it often is not.
One of the top reasons to avoid Chapter 13 is that debtors must meet certain eligibility requirements. This begins with having a steady income, which excludes people who might really benefit but who are currently unemployed and having trouble making ends meet. Often, people with this type of debt problem had arrived there as a result of the lack of income. The irony is that most debtors with a steady income would have repaid the debt in full. More interesting is that the Chapter 13 means test requires that a debtor's income exceed certain thresholds in order to be eligible for this option. Go figure.
Another one of the top reasons to avoid chapter 13 is that it can bring your lifestyle under a court mandate. While many people are okay with that kind of regulation over their lives if it helps those clear debts, some debtors feel hopelessly trapped when told where to live, how to travel, what food to eat... Remember, once you file for chapter 13, the court and trustees have the right to look at the minutest details of your income and expenses and order changes that they deem fit.
To clear the loan from your income you will need to forfeit any unexpected profits that come your way during the time chapter 13 is in force. Suppose you are gifted or willed a new car or make unexpected profits from a side business, the asset might be forfeited toward payment of your loan. Top reasons to avoid chapter 13 also includes the fact that your spouse may also be asked to provide detailed reports of their assets, income, and expenses, even if you don't file for bankruptcy jointly.
Prior to filing Chapter 13 bankruptcy, debtors would be best served by creating their own, profession budget and repayment plan, especially if they have the means to do so. This not only enables the debtor to keep his financial circumstances out of the public domain but will actually improve his credit rather than ruin it. - 29866
About the Author:
With more than 16 years of financial services experience, Chris Blanchet currently manages a debt blog at HowToRepayDebt.com that aims to help people with Debt Trouble As well, he is the Editor of Debt Consolidation Opinions.com.
