Chapter 13, also known as a wage earner’s plan, was created to help borrowers make realistically planned payments to their debt based on their income. After a court-decided period of time is over, your remaining debt is waived. In total, the only losses you’ll experience are the 3-5 years it took to pay off the debt and the next 7 years it will take to be removed from your credit report.
The qualifications for filing are designed to ensure that you understand the consequences of bankruptcy and whether it’s the best option for you.
There are necessary steps to take before you are qualified to file. One of the most important steps is financial counseling or, more specifically, pre-bankruptcy credit counseling. Don’t panic, it’s not a pass or fail test. Pre-bankruptcy credit counseling provides a way to review your situation and see if there is an alternative to filing for personal bankruptcy. For example, if Nia has debts, feels overwhelmed, and goes to counseling only to find out her situation isn’t as bad as she’d thought, then she walks out with a simple payment plan. This would mean that counseling saved Nia from the unnecessary headaches of filing and, even better, saved any further damage on her credit report.
Once financial counseling is finished, you’ll receive a certification which will be submitted with the bankruptcy paperwork no more than 15 days after filing. This certification will prove that you’ve not only done counseling within 180 days of filing but also that you’ve gone through an approved agency.
Though a fee for filing is mandatory, you can pay it back in installments or separate payments. You can learn more about this process and its fees when you visit consumer.ftc.gov.