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When Is Filing a Chapter 13 Bankruptcy Helpful?

  • By: Christopher Benson
  • Published: March 17, 2015

There are 2 obvious reasons:

  1. A Chapter 13 is a great solution to stop wage garnishments.
  2. A Chapter 13 is a great solution to stop foreclosure on your house, save the house and cure the missed payments over time.

There are four main factors that influence whether an individual can or should file Chapter 7 or Chapter 13 bankruptcy: your income level, the type of debt you owe, how much property you own, and if you are at risk of losing vital services, like power, shelter, or transportation.

First, your eligibility for one of these two types of bankruptcy depends on the means test. The means test simply determines if you have the “means” to pay back your debt or not. If you are above the median income level for your state based on family size, you will most likely fail the means test. This means that a Chapter 13 payment plan is your only bankruptcy option.

If the debt you owe includes child support or alimony, a Chapter 7 bankruptcy filing will not help your situation at all, while a Chapter 13 filing may improve it. That’s because these debts sail through Chapter 7 untouched and are still owed in full at the conclusion of your case. In Chapter 13 cases, these debts are rolled into the payment plan, meaning the court and your attorney help you determine a reasonable and realistic way to pay back these debts within the next 3 to 5 years. However, if you owe a large amount or alimony or child support that cannot be paid back in that time frame, this may put a Chapter 13 out of reach for you.

If you own multiple cars, homes, vacation property or other valuable assets, Chapter 13 is a better option than Chapter 7. In Chapter 7, any assets that aren’t considered essential to daily life are given over to the trustee to be sold to pay back your creditors. In Chapter 13, you are the one paying back your creditors, so there’s a much broader protection for personal property.

If you aren’t in danger of losing your home, car or utilities, you have a little more wiggle room when it comes to bankruptcy. However, filing Chapter 13 bankruptcy will still invoke the automatic stay and protect you from collections activities. This means you can stop paying on non-vital debts, like medical bills, credit cards and other unsecured assets while your case is being processed.

Over the past 32 years, the Law Offices of Christopher A. Benson has helped over 2,300 of Washington clients take control of their financial situation. We can stop your garnishment and change your monthly payments for all your combined unsecured debt, and if you have had more than $600 garnished within the last 90 days, we can get all of the money back in most cases. But you have to act quickly–call (253) 815-6940 for your free consultation, or email us today. Evening and weekend appointments available.

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