Chapter 13 is a type of bankruptcy that allows you to gain protection from creditors while repaying a portion of your outstanding debt monthly over an extended period of time. For the three- or five-year duration of the repayment plan, the court allows you a set amount to live on and a court-appointed trustee divides your disposable income among your creditors according to the plan.
A Chapter 13 bankruptcy can be an advantageous course toward financial stability and rebuilding your credit. However, successfully completing the repayment plan requires careful management of your resources and spending. Here are some practical, positive actions to take:
- Create a comprehensive budget — This document should account for all your income and expenses, including regular bills, groceries, transportation, and discretionary spending. Ensure that essential expenses like housing, utilities, food and transportation are met before allocating funds for discretionary spending. Monitor your spending habits to identify areas where you can cut back. Utilize your budget as a guide and adjust when necessary to stay on track. There are free apps available to help you do all this.
- Live frugally — Minimize unnecessary spending by reviewing your budget and identifying areas where you can cut back. Consider cheaper alternatives for groceries, entertainment, or subscriptions. Explore free or low-cost alternatives for hobbies and leisure activities. Explore ways to save money by doing things yourself. Consider cooking at home more often, performing basic repairs or finding free entertainment options.
- Save for emergencies — You should save any additional money that you earn or receive during the case. Start small with even a few dollars a week. Saving rather than spending the extra money, puts you in a better position to pay for any emergency expense that arises without risking the success of their bankruptcy.
- Seek credit counseling — Consider credit counseling services to develop strategies for rebuilding your credit score after completing your Chapter 13 plan. Many organizations offer free financial literacy resources and budget counseling. Gaining financial knowledge will empower you to make informed financial decisions in the future.
- Avoid taking on new debt — Resist the temptation to acquire new debt during your plan period. Focus on fulfilling your existing obligations under the Chapter 13 plan.
By implementing these tips, you will be able to meet your Chapter 13 plan payments consistently, which will keep you on a path to successful completion of the plan and discharge of your remaining debts.
If, however, you fall into difficulty meeting your plan payments, you should immediately notify your Chapter 13 attorney. Your attorney can communicate with the trustee to make sure that you don’t end up in default and can help you explore possible solutions.
Jeff Field & Associates has more than 30 years’ experience representing debtors in Chapter 13 proceedings throughout the Atlanta metropolitan area, with offices in Athens, Douglasville, Gainesville, Lawrenceville, Marietta, and Scottdale. To schedule an appointment, call 404-381-1278 or contact us online.