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Chapter 13 Bankruptcy – Timing is Everything


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Depending on your financial situation – how much income versus how much debt you have – your North Carolina bankruptcy attorney may recommend you file Chapter 13 bankruptcy. Even if you’re interested in having all your debts wiped out in a Chapter 7, you may not qualify if you have too much disposable income (according to bankruptcy laws).

One of the most important things to know about a Chapter 13 filing is that timing is everything. Consider this – the reason you’re considering a Chapter 13 debt reorganization in the first place is because you’re having money problems. With that in mind, if you don’t go into your bankruptcy with the proper planning, you’re destined for failure.

Even though there are several steps to a Chapter 13 bankruptcy such as meeting of creditors and plan confirmation, payments on the plan will start before all of these things are finalized. What’s really important is the date you file. No matter what day of the month you file, your Trustee payments begin on the first of the following month.

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If your money is really tight, you can maximize the time you have to accumulate funds to make sure your Chapter 13 gets off to the best possible start. Roughly 67% of Chapter 13 bankruptcies fail. They fail for many reasons, but generally failure falls into a few broad categories:

#1 Same Problems, Different Day There’s a reason people end up in Chapter 13 – usually more than one. Employment issues, medical problems, bad financial habits and divorce are just a few of life’s little issues that can derail you financially. Filing a Chapter 13 doesn’t magically dissolve these problems. If you are a poor money manager, unless you get a financial 411 pretty quickly, you may end up back in trouble. If you're on a Chapter 13 plan, it's best to get really frugal fast - making green changes like shopping at thrift stores, carpooling and saving on household energy costs are all money savers. Even if your historical problems don’t recur, new problems may crop up. Life happens…

#2 Set Up to Fail Depending on how your plan is set up, it may be unwieldy. Chapter 13 plans can last from three to five years. If your plan is set up to where every single dollar (or thereabouts) is dedicated to the plan, it will be a real challenge to sustain. For those that are smart enough to consult a reputable bankruptcy attorney, you’ll have the benefit of good legal advice when setting up your plan. But if you’re one of those who goes it alone, you are statistically doomed to failure. Only 1% of Chapter 13 filers who file for themselves rather than using an attorney are successful.

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#3 Postponing the Inevitable Some people file Chapter 13 as a measure to stave off an event – usually a home foreclosure or auto repossession. The notion of losing your home – even when you truly can’t afford to keep it – sends many into a panic. Filing a Chapter 13 will give you a stay of execution on a foreclosure, but if you can’t afford the mortgage payments, losing the home is inevitable. The same goes for your auto loan. In these cases, you can convert to a Chapter 7 and get free of your debt even though you’ll end up having to find new accommodations.

One of the best ways to make sure your Chapter 13 doesn’t become one of the failure statistics is to ensure you time it perfectly. Your best bet, if at all possible, is to ask your bankruptcy attorney to file your Chapter 13 on the first of the month. That will give you 27-30 days (depending on when the first falls) to save up money to get yourself off to the best possible start. Contact a reputable North Carolina bankruptcy attorney to discuss whether a Chapter 13 bankruptcy is right for you.

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