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If you will not be able to repay all or almost all of your debts under a Chapter 13 plan, it is probably not a good option for you. Consider filing for straight "Chapter 7" bankruptcy. If you will be able to repay all or almost all of your debts in three years, it may not be necessary to file a Chapter 13 plan. The Consumer Credit Counseling Service (a nonprofit organization sponsored by creditors) might be a good alternative. You may telephone the Consumer Credit Counseling Service at 1-800-777-7526.

The Consumer Credit Counseling Service starts by helping you figure out a monthly budget designed to leave you and your family enough money to live on and to help you repay your bills over a couple of years. If you don't have the income to do it, the Consumer Credit Counseling Service will tell you so. If feasible, they will help you devise an overall repayment plan and will also help persuade your creditors to go along with that plan. In effect, working with the Consumer Credit Counseling Service is simply an informal Chapter 13 plan, and it works well for many debtors. If you are a homeowner, it is penny wise and pound foolish not to at least consult a bankruptcy lawyer before filing for bankruptcy - to ensure that your home is protected.

Bankruptcy lawyers and do you need one?

Legally, you do not need a bankruptcy lawyer. But practically, a lawyer who specializes in bankruptcy law might save you a lot of money by helping you take advantage of all legal exemptions, so you don't have to give up more to your creditors than is legally required. The bankruptcy lawyer will make sure that all the forms are filled out properly. And a lawyer can advise you of possible alternatives to bankruptcy - it might turn out that there are better ways to deal with your problems.

Is Chapter 13 bankruptcy the right option for me?

In bankruptcy law, chapter 13 is a good option for a debtor if repayment of all (or almost all) debts is feasible over a three-year period. Preparing a budget can help you decide. Your goal is to use 80 to 90% of your take home pay for family living expenses and to devote the remaining 10% to 20% of your take home pay to repayment of debt. After you prepare your budget, subtract your monthly living expenses from your take home pay and multiply that number by 36. Compare the result to your total debts. If your result is not at least as big as your total debts, Chapter 13 is not a viable option for you.

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