It is a common concern for those who are having severe financial difficulty – can I even afford to file bankruptcy? The bigger question may be if you can afford not to file. That is, can you afford to continue to live under the stress and anxiety of constant money worries? 

The good news is that bankruptcy can be affordable. More importantly, filing for bankruptcy can give you peace of mind and provide lasting protection if you go about it the right way. 

When is Chapter 13 a Good Choice?

Chapter 7 bankruptcy is the method of filing most familiar to the ordinary person. Chapter 7 is the type of bankruptcy that allows you to “wipe out your debts” and begin again with a completely fresh slate. There is no payment plan and requires no long-term commitment from the filer. A typical Chapter 7 case lasts about four months from beginning to end. Individuals file a bankruptcy petition and go to court once. After that, the case is over as long as all parties agree.

Chapter 7 is a simple bankruptcy but may not be appropriate for a more significant or severe financial situation.  

In contrast, a Chapter 13 bankruptcy lasts a minimum of three years and may last as long as five years. During that time, the filer makes regular payments to a Chapter 13 bankruptcy trustee. The Trustee collects payments and allocates the monies to each of the creditors. In most cases, attorney fees are included in a payment plan you can afford. 

Given the length of the process, is Chapter 13 a better financial option? 

How much will an individual have to pay back, and does it make sense if you have financial difficulty already? 

It is essential to understand that Chapter 13 keeps creditors at bay throughout the entire payment period, which offers extended relief from harassment and stress. Chapter 13 may ultimately cost more, but it is spread out and gives you the breathing room you need while allowing you to keep your home and your car. If you still find yourself in financial duress, you can frequently convert to a Chapter 7 at a later date. 

Another possible reason Chapter 13 might make sense is if you do not have medical insurance. One illness or injury can result in a financial disaster you may not recover from – so while your desire may be to get out of debt as quickly as possible, Chapter 13 offers a strong safety net and room to start over.  

If you have previously filed a Chapter 7 bankruptcy (within the past eight years), you cannot file for Chapter 7 again. However, you may be eligible to file a Chapter 13 bankruptcy, which can be converted to Chapter 7 at some point. 

A typical Chapter 13 bankruptcy monthly payment is approximately $150 and may even be less. The initial cost to file is about the same as a Chapter 7. Therefore, it may be surprisingly affordable to obtain bankruptcy protection through Chapter 13. 

If you are worried that you can’t afford to file bankruptcy, call Richard V. Ellis today. Ellis is a Sarasota-based bankruptcy and family law attorney. He has helped hundreds of area residents to get out from under financial hardship – and the fear and anxiety that accompanies it.

Bankruptcy may not answer every problem, but you should at least call for a free consultation to better understand all of your options. We are here to help.