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Is Chapter 13 Right for You?


Of the two consumer bankruptcies—Chapter 7 and Chapter 13—the first is by far the most popular in Florida. Statistics regularly show that Florida consumers file about three times as many Chapter 7 bankruptcies as they do Chapter 13.

However, Chapter 13 remains popular because it provides greater flexibility than Chapter 7. With this bankruptcy, a consumer does not lose any property. Instead, they contribute their disposable income to their creditors over 3 to 5 years and receive a discharge of unpaid debt at the end. Still, 3-5 years is a long time to diligently stick with a payment plan, and statistics show that only 1 in 3 people actually make it to the end of the process.

Before choosing to file for Chapter 13 relief, we encourage consumers to carefully consider their goals. What do you hope to accomplish by filing for Chapter 13 bankruptcy? And can you stick to the payment plan? Please contact one of our Plantation bankruptcy attorneys to review what works best for you.

Many Consumers Fail to Protect their Homes

An interesting law review article interviewed hundreds of people who filed for Chapter 13 protection and asked them what they hoped to accomplish by filing. One of their primary goals was to protect their home. Of course, Chapter 13 can do this because the automatic stay will stop any foreclosure action. You also get time to catch up on any mortgage arrears.

Still, as mentioned above, only 1 in 3 people complete their Chapter 13 bankruptcy. What happens to the other 2 in 3? Did they keep their homes when they dropped out of their repayment plan?

Actually, the study found that 14% had lost their homes within weeks of stopping payment. Another 59% entered default, which meant that they were vulnerable to foreclosure as well.

If you are hoping to save your home, we encourage you to think carefully about whether you can stick to a plan that lasts several years. If not, you might be better off simply filing for Chapter 7 protection and losing your home.

Financial Stress Does Not Decrease for Many

Another goal consumers had when filing for Chapter 13 protection was to reduce financial stress. Once the automatic stay is in place, creditors cannot contact debtors. All collection calls and letters must cease.

However, if you drop out of your Chapter 13, then collection actions can start back up. You might be sued. You might have your wages garnished. At a minimum, you can expect calls to start all over. The study mentioned above found that only roughly 26% of people converted to a Chapter 7 to wipe out their qualifying debts. Instead, they remained on the hook for them and for increased interest payments.

Let Us Review Your Options

Although Chapter 13 has its place, it is not the best option for many people. Only those with rock solid jobs should enter a years’-long repayment plan. At Nowack & Olson, PLLC, our Plantation bankruptcy attorneys help clients choose the best bankruptcy solution for their needs. Contact us today to schedule a free consultation.




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