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Chapter 13 bankruptcy often chosen for longer payment plans

Bankruptcy is sometimes a hard word to hear, but it can be a new beginning after difficulty with debt. Despite the importance of understanding bankruptcy, many myths persist about it that can damage someone's chances of learning how to manage extreme debt.

This is shown by looking at some patterns of bankruptcy filings. Accountant and lawyers alike brace for the spike in filings that has always come after tax season in the last decades. Experts believe this is because more people believe they can afford bankruptcy after a tax refund.

National filing data shows that attorneys are more likely to get bankruptcy declared for their clients than when filers represent themselves in the process. People who wish to file for Chapter 7 bankruptcy, which often settles debts with a trustee taking control of a person's assets, may feel they cannot afford a lawyer.

Chapter 13 bankruptcy, which allows filers to pay off debts over a longer time while retaining much of their property, is often structured with fewer up-front payments. This is not to be confused with debt consolidation, which should be carefully considered to rule out scams and frauds.

Payment plans may allow you to cover legal fees and debt service while you keep the assets that matter to you. Chapter 13 can help reduce upfront payments and interest on debts as well as stop creditors from constantly trying to reclaim debt.

Legal representation can help ensure that the bankruptcy filing process has the best chance at success. An attorney may also assist clients in selecting the best type of bankruptcy for their financial situation.

Source: Chicago Tribune, "What if you can't afford to go bankrupt?," Paul Kiel, March 05, 2018

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