You determine that your debt is unsustainable, and it’s holding you back financially. You simply don’t earn enough money to ever pay off all of the debt, so the interest keeps compounding. You want to get a fresh financial start, so you consider Chapter 7 bankruptcy.
Unfortunately, you do not qualify. Due to the amount of money that you earn, you don’t pass the means test. This is frustrating because you know that you still can’t pay off your debt, but your earnings are too high for you to liquidate nonexempt assets and erase that debt. Do you still have any other options?
You may be able to use Chapter 13
A potential option may be to use wage earner’s bankruptcy, or Chapter 13 bankruptcy. This is designed for people with a higher level of income.
Essentially, with Chapter 13, the court will look at your income levels and determine what you would be able to pay within your budget. They can then create a repayment plan. Some of your debt may be eliminated, but most of it will be consolidated into this plan. As long as you make the monthly payments for the terms of the plan – typically 3 to 5 years – then you can still eliminate that debt. Spreading the debt out sometimes can make it affordable if you do have an income.
What steps should you take next?
As you can see, it’s quite important to know about all of the options you have when facing this type of situation. Chapter 13 may be different than Chapter 7, but it can still help you achieve the results you are after.
