Whether or not you should file a Chapter 13 Wage Earner Plan depends on your situation. First, you must determine if you qualify for Chapter 13. (Because a Chapter 13 bankruptcy is paid for out of the wages you earn each month, Chapter 13 is also known as a Wage Earner Plan).
For individuals in the United States, there are two basic forms of personal bankruptcy. Chapter 7 bankruptcy, also known as a liquidation bankruptcy, discharges your debts in a relatively short period of time.
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Since new federal bankruptcy rules became law on October 17, 2005, anyone whose gross income is higher than the median income for their state is required to file bankruptcy under Chapter 13, instead of under Chapter 7. Therefore, if your income is higher than the median income for your area, the choice is made for you: you must file under Chapter 13.
Second, you should compare a Chapter 13 Wage Earner Plan with your other alternatives to straight Chapter 7 bankruptcy. Since a Chapter 13 plan will typically last for five years, you should explore any options that can be completed in less than five years. For example, if you can get a debt consolidation loan and repay it in three years, a debt consolidation loan is probably a better option for you than a five year Chapter 13 Wage Earner Plan.
If you don't qualify for a debt consolidation loan, but you want to avoid the court process, and can afford to pay your debts in full over a three to five year period, credit counseling may also be an option.
Finally, you may be able to cut your expenses and repay your debts yourself.
The court process is never fun, and you will want an attorney's assistance, which will increase the cost, so only choose a Chapter 13 plan if it is the best option for you.
A Chapter 13 Wage Earner Plan is designed to give you a fresh start, so review your options and decide which course of action is best for you.
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