It is true when they say it is not how much you earn but how you spend. Your regular income may be enough to sustain your daily expenses and standard of living now. However, significant life changes or disruptions may force you to spend more than you initially planned.
We do not expect sickness. We do not plan accidents and resulting injuries. We do not foresee divorce and the legal obligations that come with it. These unplanned life events can force wage earners to shell out considerable sums of cash on a single occasion. They eventually fall into debt trying to fulfill their financial responsibilities.
Here are ways Chapter 13 of the federal bankruptcy code can benefit wage earners who fall into debt.
It can help you pay your debts through a feasible repayment plan
When you file for Chapter 13 bankruptcy, you can restructure your obligations and repay your debts through a more affordable repayment plan. The bankruptcy court might not even require you to pay back all your debts. It consolidates your debts into fixed monthly installments with more favorable terms and conditions. You will pay the monthly installment to a court-appointed trustee who will disburse the payment to your creditors.
It gives you time
You can pay your monthly installments over a more extended period. Depending on your current monthly income, it can extend to three to five years. Extending the period of payment can lower payments. It also gives you time to increase your income and reorganize your expenses.
You can save your assets from foreclosure
People who file for Chapter 13 bankruptcy can cease foreclosure proceedings. You can save your home even when you are behind on mortgage payments. You can also keep your cars and important assets if you can continue to pay your secured debt payments.
Chapter 13 bankruptcy can help most middle-income earners recover from debt and rebuild their credit. Although eligibility requirements and concerns exist, it is an effective way to get back on track with your financial obligations.