If you consider filing bankruptcy, you may hear people refer to your options as liquidation and the wage earner’s plan. When you go to an attorney, he or she will refer to your options as Chapter 7 and Chapter 13.
According to the U.S. Courts, people call Chapter 13 bankruptcy the wage earner’s plan due to how the process works.
The basics
In a Chapter 13 bankruptcy, you and the court create a plan to allow you to repay your debts. You may not repay every debt completely, but you will attempt to pay as much as possible. Your income will determine how much you pay. Your plan will cover a three to five-year period. In the end, the court discharges any debts you could not pay in full.
Wage earning detail
Most people who file a Chapter 13 have wage income; however, income from wages is not required to file Chapter 13. The person filing or a member of the household must have regular income. That regular income could be from Social Security, retirement, wages or other regular income. The court will assess your earnings to be sure that you can at least cover your high priority debts while also paying for your daily needs.
Reasons to choose it
Chapter 13 not only allows you to repay some debts but it also enables you to keep your assets. Unless you have a secured asset that you would like to give up, you can usually avoid liquidating any property by choosing this bankruptcy option.
You also have the benefit of repaying some debt instead of having it all written off under bankruptcy. This looks good to future creditors and is quite beneficial as you begin to rebuild your credit after filing.
