Chapter 13 bankruptcy is an option that you may have when you don’t qualify for Chapter 7 or you’re not interested in going through a liquidation bankruptcy. This plan is often referred to as a wage earner’s plan, or you may have heard it called a “wage earner’s bankruptcy.”
It’s clear that this differs from liquidation bankruptcy, or Chapter 7, but have you ever wondered how? Why did it get this name and what does it mean if you decide to use Chapter 13?
You create a repayment plan based on your wages
This is called a wage-earners plan because only those with a steady income are going to qualify. The goal of the plan is to consolidate the debt that you have and then create a repayment plan to slowly pay off that debt. This usually takes three to five years. This may mean that you have far longer to pay the debt than you would have initially, which makes it affordable to you. But this only works if you have an income and you can make those are monthly payments consistently and on time.
When setting up this plan, the court is going to consider a lot of different factors, from the total amount of debt that you have to the amount of monthly income you bring in. Remember that this isn’t intended to give you another additional payment, but to eliminate the payments that you were already defaulting on and to give you one that you can pay in your current situation. This can be very helpful, especially if you have a stable job that you can count on for the years to come.
If you’re interested in the specifics of any type of bankruptcy, it’s important to carefully consider all of the options at your disposal. While Chapter 13 is certainly an option if you have a steady income, don’t assume that Chapter 7 is off the table, nor that it will pose any particular hardship. You need experienced legal guidance to sort out the details.