Myth Busted: Most Can Afford A Chapter 13 Plan

by Craig Andresen

One of the most stubborn myths about bankruptcy is the one which says
that chapter 13 requires full payment of all your debts over 60
months. If true, this would indeed rule out chapter 13 for most
consumers. After all, what good would come from being granted 60
months to pay off all your debts? If you can't afford your payments
now, how in the world could you afford your payments if you had only
60 months to pay them? This myth about paying your debts in full in
chapter 13 is, happily, only a myth.

In fact, the law says something quite different: in chapter 13, your
monthly plan payment is based on what you can afford. Then, and at
the end of the chapter 13 case (either 36 or 60 months), all the
remaining balances on your debts are wiped out, just like in chapter
7.

You might wonder how that can be fair to your creditors, but the
answer is easy, and the law gives it full recognition – your creditors
were slated to get absolutely no payment in a chapter 7, weren't they?
So how could it be unfair to pay them a dividend consisting of what
you can offord, in a chapter 13? This is especially true when the law
requires that you pay what you can afford into your chapter 13 plan,
after paying all your reasonable monthly living expenses.

And no, there isn't any catch-22 lurking in chapter 13. Congress
would not have bothered to enact chapter 13 if you had to pay more
than you could afford as a monthly payment, because no one would be
ever file chapter 13 if that were so. Also, lawyers wouldn't steer
clients into chapter 13 if the monthly payments were not possible for
clients living in the real world to pay.

So think about it — maybe chapter 13 wouldn't be such a bad idea for
you after all. There's no means test to worry about, you can get rid
of more debts in a chapter 13, and your case is often subject to less
scrutiny by creditors than a case under chapter 7. And whatever your
reason for choosing chapter 13, you can be sure it will solve your
debt problems just as effectively as a chapter 7.

For more information on these matters, please call our office at 305 548 5020.

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