At one point in your life, your income was the highest it ever was and you were riding high. It felt like you could buy just about everything, and you did, racking up a sizeable debt load in the process. Then, one day, you found yourself out of a job and the income went away. Eventually you managed to secure another position, but the pay was much lower. You’re able to keep up with the debt, just barely, and there’s nothing left to take care of an emergency. This is where a chapter 13 bankruptcy can be a viable option for retaining assets while getting more out of your income.
The bankruptcy code for a Chapter 13 bankruptcy covers the repayment of debt over a period of time, anywhere from 36 to 60 months. Essentially, you are bankrupt for up to five years, but this chapter is not nearly as drastic as a Chapter 7 is. Filing under Chapter 13 allows you to keep your possessions, home, vehicles and other items of value. This is possible because you pay back your debt while your case is open. Satisfying the court at the end of the pre-determined filing period results in the debt balances being wiped out and resuming business as usual.
A general rule of thumb used in qualifying for Chapter 13 is having income that is over the annual median income for the state. In other words, you have too much money coming in to get a quick discharge under Chapter 7. The court feels that your income enables you to repay your debt under a reorganization plan. And ultimately, this can be useful. Your credit rating doesn’t take as hard of a blow as it would with Chapter 7, and you emerge from it in a much better position than you were when you entered.
Talk to a lawyer before you make a decision about filing. There is a lot of work to do in order to enter bankruptcy, and a lawyer takes a majority of it off your hands.
