A consumer files for Chapter 13 bankruptcy when he or she reaches an agreement with his or her creditors to repay them over five years with a fixed monthly payment. The court authorizes the repayment plan and prohibits you, the consumer, from deviating from the payment schedule over the five-year period.
What Is Incorrect About Chapter 13 Bankruptcy?
This strict repayment schedule does not account for changes in your income, returning to school, being laid off, or any other changes in your income, which can make it difficult to keep up with payments and result in the bankruptcy being dismissed once you resume making default underpayments. A 2006 academic study (Debtor Discharge and Creditor Repayment in Chapter 13 by Scott Norberg) supported the conclusion that Chapter 13 bankruptcy is unsuccessful two out of every three times, or 67% of the time.
Therefore, you will have negative marks on your credit report for 7 to 10 years, your obligations will remain, and you have a 67% chance of failing. Now, do you believe Chapter 13 bankruptcy is a viable option?
If you cannot file Chapter 7 bankruptcy, do-it-yourself debt settlement is a better method to eliminate credit card debt. The FTC has recently clamped down on debt settlement companies and prohibited them from charging upfront fees prior to reaching settlements with your creditors. There is nothing a debt settlement company can do that you cannot do yourself. You can attain better results and eliminate credit card debt more quickly on your own.
Just as you negotiate the price of an automobile, you can negotiate a lump-sum settlement with your creditors to eliminate your bad debts. They would prefer to resolve with you before they are required to charge off your account in six months, and they do not want to wait five years for payment in the event of bankruptcy. Therefore, both parties benefit, and you have a greater chance of success compared to Chapter 13 bankruptcy.
There are a number of books and home study courses that teach debt settlement and negotiation on a do-it-yourself basis. You can use the money you would have paid a debt settlement company to negotiate your debts away in six to twelve months. Then you only have to think about rebuilding your credit within one to two years, as opposed to seven to ten years with a bankruptcy filing.""
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