Filing for bankruptcy protection is one step you can take to reclaim your finances when things get out of hand. One form of bankruptcy that you might file is a Chapter 13. This is often referred to as a working man’s bankruptcy because you will be required to make payments on the case based on a schedule issued by the court.
This option has some specific benefits and drawbacks that you have to weigh if you are considering it. Some of these go hand-in-hand with each other.
Even though you will be making payments on the case, you will still have to give up your credit cards. This might seem difficult at first, but learning how to live life based on your income can help you to solidify a good financial future.
Your excess income will go to the court to pay off your debts. The court determines what necessary expenses you have and then sets the repayment based on that amount and your income. You will be financially limited for the duration of the bankruptcy but this can provide you with a history of good money management that you can use once the bankruptcy is completed.
Some of the debts you have won’t be discharged in the bankruptcy. These include the mortgage on the home you live in, student loan debt, tax liabilities and child support. The good news is that continuing to pay these when the bankruptcy is completed might be easier since you won’t be saddled with the debts that were forgiven.
When you are trying to decide if you should file for bankruptcy, think about the totality of your situation. Determine if this is the right decision for you and proceed accordingly.
Source: FindLaw, “Pros and Cons of Declaring Bankruptcy Under Chapter 13,” accessed May 18, 2018