Being overwhelmed with debt is extremely stressful, but the federal government has provided ways for individuals to get out from under the burden. Filing for bankruptcy helps the person start over and get back on track financially. Many people find the bankruptcy option known as Chapter 13 in Lawrence KS appealing because it allows them to make payments to their creditors for a few years instead of defaulting entirely. They can pay back all, or nearly all, of the money they owe. But, does it make sense to file even if they aren’t completely sure they can afford those monthly payments?
Strict Payment Plans
Before a payment plan is approved after filing for Chapter 13 in Lawrence KS, the person must verify income to prove that the payments can be made as scheduled. Theoretically, payments could be made even on a very tight budget, but this leaves no room for unexpected bills or true emergencies.
If there is no safety net of savings or the ability to borrow some money from friends or family for unexpected expenses, the bankruptcy plan will collapse at that point. Typically, even if just one payment is missed, the trustee overseeing the plan ends the agreement. The creditors can immediately begin demanding full payment and start taking legal action. The individual then may be able to file for Chapter 7, which discharges much of the debt after dissolving assets to pay whatever can be managed.
Budget Considerations
All of this can be exhausting and time-consuming. It may be better for the person to file for Chapter 7 instead of Chapter 13 if income levels are just barely adequate for the agreement. Consulting a lawyer such as Joseph I. Wittman Attorney at Law can provide insight on which strategy is best.
If the budget appears sufficient and would cover relatively small emergency expenses, choosing Chapter 13 could be a reasonable decision. The person must understand, however, that he or she will be living very frugally for the next three to five years. If the person’s income increases, the court requires this information to be disclosed to the trustee. Payments are likely to increase to ensure creditors receive everything they are owed.
