Why File A Fort Lauderdale Chapter 13 Instead of A Credit Counseling Plan?

On behalf of Bankruptcy Law Firm of Clare Casas on Monday, October 24, 2011.

At it’s essence, a Chapter 13 bankruptcy is the equivalent of a credit consolidation plan but better. In a Chapter 13, all the creditors have to participate and you pay what you have disposable at the end of the month into the plan instead of what a credit counselor says you have to pay. Something that credit counseling agencies forget to tell you is that not all creditors will participate in the plan. People usually find out after they’ve been paying into a plan for months and then they get sued by American Express, Bank of America or Chase.

You are not required to pay the full amount of your debts or a certain percentage of your debt into a Fort Lauderdale Chapter 13 bankruptcy plan. You are required to pay your disposable monthly income into the plan. In a credit counseling repayment plan, you may be able to convince your creditors to reduce the amount you owe but it’s unlikely that you’ll convince them to drop it as much as the bankruptcy will. Another benefit is that in a Chapter 13, interest and late fees stop. Under a consolidated credit plan, a creditor may reduce the interest but you are still paying it. But the overall theme is that the creditors have to agree to give you help. And you will get 1099’s to report on your tax return for the difference of what you paid them and what they say you originally owed. Ouch.

If it sounds like you’re at the mercy of the creditors in a non-bankruptcy repayment plan – you’re right. With a Chapter 13 repayment plan, the creditor and you both fall under the jurisdiction of the bankruptcy trustee in a Chapter 13 case.

Two Benefits of a Chapter 13 That A Non-Bankruptcy Plan Can’t Offer

A Chapter 13 bankruptcy considers your child support and alimony payments when looking at your disposable monthly income. Non-bankruptcy repayment plans often don’t care about other obligations that you have.

Also, if you have a tax debt that can’t be discharged through the bankruptcy itself, a Chapter 13 bankruptcy will allow you to pay it off without interest and penalties in most cases. Without the court’s help, this type of relief is just about impossible to come by.