Chapter 13 Trap

Watch out for the “Chapter 13 Trap!

Watch out for the dreaded chapter 13 trap! You go after a chapter 7 bankruptcy in the hopes of wiping the slate clean. The judge reviews your paperwork. The court then finds that you have enough income to pay off half your debts within a five year window and so orders you into a chapter 13 extended repayment plan!

Exactly how and why the judge makes this determination is still a mystery. What’s the bottom line? The poor consumer, who fully expected to shed all his debts, suddenly finds himself facing years of financial bondage with most of his income going to his creditors. Who said slavery is dead?

If you decide to file for chapter 7, be very sure that your attorney is entirely confident that the court will not deny your request chapter 7 deal and instead order you into chapter 13. Grill your lawyer on this. Demand that he explain why you don’t have to worry.

Ask him what steps you can take to further reduce your chances of ending up with a chapter 13 plan. How can you change your financial affairs so as to maximize your chances of qualifying for a chapter 7 deal that will wipe out all your debts?

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