While filing for Chapter 13 bankruptcy might initially seem like your best option, given that you can keep your house and car, consider carefully the commitment involved. Can you follow through on three to five years of payments? What is your end goal?
The truth is that Chapter 13 is difficult. It’s a reasonable choice, but it comes at a heavy price for an extended period. Some people rush in to it emotionally, thinking “this is my only option.” But what you have to consider is: Is it the best option?
Many individuals who file for Chapter 13 find they are unable to keep up with the payments. Either they fail to modify their lifestyle enough or experience an emergency that causes them to fall behind in their repayment. Keep in mind that Chapter 13 does not allow you to have an emergency fund, so if you have a car repair or accident, you could be in trouble.
Before filing, ask yourself:
- Do you have enough resources and earning power to complete repayment?
- Is your job secure? Is your health stable? Any interruption in your income could make your situation untenable.
- Did you file through an experienced attorney? Note: People who file without an attorney have a much higher rate of failure, so it’s in your best interest to pursue legal help.
- Can you live without credit for five years? You will be unable to buy a car or house during this time, as you cannot qualify for a loan.
- Are you buying time for a stay on your home foreclosure or some other reason with no intention of fulfilling your repayment plan?
If you have no concerns about your answers to these questions, speak to an attorney about whether Chapter 13 is best for you. To safeguard your future, you need to make an informed and responsible choice. Don’t become a failed statistic. Rather, be wise in your next steps. They will affect your future more than you can imagine.