There comes a time in life when we experience financial turbulence. The balancing factor between our income flow and expenditure fails, and debts become the order of the day. Threats from creditors intensify day by day, and the hard reality dawns on us. At such a point, we must take bold steps to salvage the sinking ship. Filing for bankruptcy is one sure way to pause the pressure from creditors and seek room to put your house in order. Consulting a mesa bankruptcy lawyer will help you understand the pros and cons of declaring Chapter 13 bankruptcy.
Chapter 13 bankruptcy is a debt repayment plan for individuals with a steady income stream. Together with your attorney, you can assess your situation and decide whether this is the right step to take. The plan enables the debtor to craft a plan to repay the total or part of their debts. You can pay within a period of three to five years, depending on your monthly income.
In Chapter 13 bankruptcy, a three-year plan is proposed to the court if your gross monthly salary is below the applicable state median. A five-year repayment plan will be proposed if your gross monthly salary is above your state’s income median. The first installment is due thirty days from the filing date. In cases where the court lets you pay only a part of the total debt, the rest of the amount will be discharged after you fulfill your part. You will subsequently not be liable for payment of the debt.
Filing for Chapter 13 bankruptcy is not an easy decision to make. You may find yourself in a dilemma trying to weigh the pros and cons of the huge step you are about to take. But, like anything else, declaring Chapter 13 bankruptcy has its advantages and disadvantages. Below we will highlight some of them to enable you to make an informed decision.
In Chapter 13 bankruptcy, the court allows you to make a single monthly payment to a bankruptcy trustee. The bankruptcy court determines the amount based on the budget that your attorney presents. This flexible arrangement allows you to only pay for the amount you can afford every month.
Your budget encompasses Chapter 13 trustee’s standards, IRS standards, and your actual monthly expenses. The figure you repay monthly is determined by deducting those three expenses from your monthly income. That figure is also called discretionary income. When you lose your job, your bankruptcy attorney can help you restructure or defer the payment plan until you get a job.
If you are in debt and facing foreclosure, declaring Chapter 13 bankruptcy will help you stop repossession. For example, you can save your home by filing Chapter 13 before the foreclosure sale date. All ongoing foreclosure proceedings will stop, but you must pay your monthly mortgage due amount throughout the plan.
When you file for Chapter 13 bankruptcy, the court will instruct your creditors to stop all forms of communication. The court will direct you to make monthly payments to the chosen trustee and not directly to the creditors. This is an advantage as you get ample time to concentrate on income-generating activities. You will have peace throughout the agreed period without worrying about calls from creditors.
Your Chapter 13 bankruptcy trustee is required by law to offer you a free two-hour financial management training. The course is meant to equip you with the knowledge to manage your finances in a better manner. Chapter 13 bankruptcy laws need you, with your attorney, to come up with a realistic budget. This rule helps many people to face reality and analyze how much they spend against how much they earn. By knowing this, you get financial freedom and can henceforth plan better in the future.
There are several drawbacks to put in your mind when considering declaring Chapter 13 bankruptcy. Below we will highlight a few.
When you file for Chapter 13 bankruptcy, your credit score will be negatively affected immediately. Chapter 13 bankruptcy will remain on your credit records for seven years from the discharge date. This means that you will have a negative credit score for three to five years from the filing date. With a negative credit score, you will have a hard time convincing new creditors to consider you. It will be almost impossible to secure a mortgage during this period.
Credit Cards are essential to have in the modern world. They allow us to buy an item with the credit card issuer’s money and pay for it later. Filing for Chapter 13 bankruptcy leads to the deactivation of your credit cards. This could affect your lifestyle if you used to make regular card payments.
Hiring an attorney to help you file for Chapter 13 bankruptcy does not come cheap. Even if you decide to go it alone to avoid the lawyer’s fee, the other mandatory amounts will still be high. The process is complex and involves costly procedures. You will pay hundreds of dollars to file the case in a bankruptcy court and pay a trustee fee. There is also a fee paid for financial counseling. All these, together with the legal fees, filing for Chapter 13 will cost you thousands of dollars. There is no guarantee that your application will be successful. In case the bankruptcy court dismisses it, you will shoulder the debt as well as the legal burden.
Living in debt can overwhelm you, especially when the creditors are aggressive. One way of solving the problem is declaring Chapter 13 bankruptcy. But, you should explore all the available options before deciding that it’s the best for you. Visit https://azbankruptcysolutions.com/mesa for a FREE bankruptcy consultation.
Arizona Bankruptcy and Debt Solutions
1013 S Stapley Dr. Mesa AZ 85204
Filing for bankruptcy isn’t the right solution for everyone. The determination of whether or not bankruptcy is an appropriate debt relief solution for your will be made based on a number of factors including the type and total level of your debt. Use this form to schedule an appointment with one of our bankruptcy attorneys. The consultation is completely free and there is no obligation.