To many people, the word bankruptcy conjures images of someone without a job or maybe a young adult who didn’t make very responsible decisions with their first credit card. However, the true face of bankruptcy is often someone with unexpected medical bills or a sudden job loss.
Perfectly responsible adults who have had successful careers can find themselves financially overwhelmed in only a matter of months. If you have fallen behind on payments and believe bankruptcy may be the best solution, you may want to consider Chapter 13 bankruptcy.
What are some of the reasons that professionals with successful careers choose Chapter 13 bankruptcy?
They can qualify for Chapter 13 bankruptcy
Perhaps the simplest reason that many people with successful careers choose Chapter 13 Bankruptcy is that they will not pass the means test for a Chapter 7 filing. If your household income is higher than the state median for your household size, you may not qualify to file a Chapter 7 bankruptcy. However, there are no income limits on Chapter 13 bankruptcy, making it an option even for high earners.
They have property they want to protect
Maybe you have invested in numerous parcels of real estate that are worth very little now but will likely be worth much more by the time you retire due to nearby development. Maybe you have thousands of dollars and personal property because you are in the process of preparing to start your own business after regaining financial equilibrium.
In a Chapter 7 bankruptcy, you would need to report those assets and potentially liquidate or sell off some of your most valuable belongings. In a Chapter 13 bankruptcy, you don’t have to sell off any of your property because you make payments to your creditors instead.
The repayment plan can preserve financial relationships
Bankruptcy is a bit of a scorched-earth tactic for resolving personal debt. It immediately halts collection activity and can lead to the discharge of someone’s credit card balances and similar debts. Lenders burned by a bankruptcy may be reticent to do business with that person again in the future, even when their credit score improves.
Those who file a Chapter 13 bankruptcy will spend three or sometimes five years making monthly payments through the courts and can therefore substantially diminish what they owe to their unsecured creditors before their discharge. If maintaining a positive relationship with any of the creditors involved in your bankruptcy matters to your financial or professional future, a Chapter 13 filing may be a better choice than a Chapter 7 bankruptcy would be.
Educating yourself about the differences between the different forms of bankruptcy can help you decide if Chapter 13 proceedings are the right solution for you.