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Note to readers: Chapter 13 Wage Earner Plans are one
of the best bankruptcy alternatives, but they
are a legal process only available to residents of
the United States. Residents of Canada should consider a Consumer
Proposal.
What is a Chapter 13 Wage Earner Plan?
A Chapter 13 plan is a negotiated settlement
between you and the people you owe money to (your
creditors). It's a deal that you make with your creditors
as an alternative to bankruptcy. It is also known
as a Chapter 13 bankruptcy.
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A Chapter 13 plan involves the reorganization of
a debtor's financial affairs. If successful, you will
have a payment plan that will protect you from foreclosure,
garnishment, and most other court actions.
To qualify for protection under Chapter 13, you must
have an income that is higher than your reasonable
living expenses.
Obviously if you don't have extra
income, you won't have the money to make repayments
to your creditors.
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Depending on your income and other circumstances,
your Chapter 13 plan may require repayment for the
full amount of the debt, or you may only be required
to pay off only a small percentage of your debts.
Before filing a Chapter 13 plan you must meet with
a credit counselor at some point during the six months
prior to filing your Wage Earner Plan, and you must
attend money management classes (at your own expense)
before a final order will be issued by the bankruptcy
court.
What are the advantages of a Chapter 13 Wage Earner
Plan?
By having a Chapter 13 Wage Earner Plan accepted,
you avoid a Chapter 7 bankruptcy. A Chapter 13 plan
is one of the best bankruptcy alternatives
available to Americans. You have a payment plan that
you can live with, and your plan will often only require
you to repay a fraction of your total debts.
One disadvantage of a Chapter 13 plan are that it
will appear on your credit report for up to ten years.
This will make it more difficult for you to borrow
in the future. Of course you also have a monthly payment
to make, even if your income falls during the plan.
A Chapter 13 Wage Earner Plan is not the right
option for everyone, but if you have a job and the
ability to repay your debts, a Chapter 13 plan is
one of the best bankruptcy alternatives.
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