To avoid setbacks, it is essential to stay disciplined and proactive throughout the Chapter 13 bankruptcy repayment period. Here are some tips for success.

Understand your repayment plan

Before making payments, take time to thoroughly review your Chapter 13 repayment plan. Understand how much you owe, who receives payments and the timeline for completion. This clarity can help you stay committed and avoid surprises.

Create a realistic budget

A well-structured budget is key to staying on track. Prioritize essential expenses such as housing, utilities, food and transportation while allocating funds for your Chapter 13 payments. Consider setting aside an emergency fund to cover unexpected financial challenges.

Set up automatic payments

Late or missed payments can jeopardize your bankruptcy case. To prevent this, set up automatic payments or calendar reminders to facilitate timely contributions. Consistency is vital to maintaining compliance with your repayment plan.

Communicate with your trustee

If financial difficulties arise, do not wait until payments are overdue to address them. Reach out to your bankruptcy trustee to discuss potential modifications or solutions. Full transparency can help you avoid penalties and keep your plan intact.

Avoid new debt

Taking on additional debt during Chapter 13 can strain your budget and make repayment more difficult. It can also increase your stress as you struggle to stay current. Focus on financial discipline and avoid unnecessary credit obligations.

If you have trouble complying, consider speaking to a legal professional with experience in Maryland Chapter 13 bankruptcies.

How landlords view bankruptcy filings

Most landlords review credit history before approving rental applications. A Chapter 13 bankruptcy may raise concerns about your financial stability. Some landlords may see it as a sign of financial struggle, while others may consider your effort to repay debts as a positive factor. Large property management companies often have strict credit requirements, while private landlords may be more flexible.

Ways to improve rental chances after filing

A strong rental application can improve your chances of securing a lease. Offering a larger security deposit, providing proof of steady income, or securing a co-signer can make you a more attractive tenant. A letter explaining your bankruptcy and emphasizing your financial recovery may help convince landlords of your reliability. Renting from private landlords instead of large companies can also increase your chances of approval.

Alternative housing options

If traditional rentals are challenging to secure, exploring alternative options may help. Subletting, seeking rent-to-own agreements, or finding landlords who do not perform credit checks can be useful strategies. Some local housing programs assist individuals with bankruptcy histories in finding rentals. Additionally, rebuilding your credit through consistent payments can improve your prospects over time.

While Chapter 13 bankruptcy can affect your ability to rent a home, it does not make renting impossible. Demonstrating financial responsibility and exploring flexible housing options can help you find a suitable place to live. Being honest with landlords and showcasing your financial stability will improve your chances of securing a rental.

The purpose of bankruptcy is to satisfy debts and get yourself on a stronger financial footing. Wiping away the debt that bogs you down through a Chapter 13 restructuring plan may prove a better option in the long and short term. While you may want to cut ties with some property, Chapter 13 makes it, so you do not have to.

What is debt restructuring?

Chapter 13 is unique because it allows you to pay back a portion of your debt through restructuring. The trustee goes through your secured debts or those with collateral such as homes and vehicles. Next, the trustee uses your income and calculates a reasonable way to repay anything you wish to keep. In some instances, you may decide to return or sell items to help pay. However, with a debt restructuring, you do not have to.

How long is the payment plan?

Once the trustee develops a plan, the court decides how long you must pay it. Most Chapter 13 payment plans last between three and five years. The length of time depends on how much debt you owe. Five years is the maximum time for a Chapter 13 payment plan. When you complete the terms of your plan, the judge discharges any remaining debt.

Getting a fresh start with your financial situation is possible. Bankruptcy is not ideal, but it allows you to learn from your mistakes and forge a better financial future.

To qualify for a Chapter 13 plan, you may not earn more than Maryland’s median income. The qualification process also considers your marital status and how many individuals live in your household.

Which debts may a payment plan include?

The bankruptcy court requires your petition to include all eligible debts in your payment plan. The court requires proof of good standing on priority debts such as taxes and financial support resulting from a divorce. You must also include the fees associated with your case.

Chapter 13 bankruptcy generally allows filers to keep cars and homes. If you have a secured loan the court may require you to pay it in full by the end of the plan. Your unsecured debts, such as credit cards and medical bills, come after your priority and secured obligations. They may still have unpaid balances at the end of your payment plan.

How do I set up my payment plan and what happens when it ends?

You may draft a reasonable repayment plan by working with your legal team. The court requires you to submit it within two weeks of filing your petition. The trustee overseeing your case must approve your plan and agree to accept your payments.

If you miss a payment, the court may dismiss your case. When you complete all your payments as agreed, however, the court may discharge the remaining balances left on your outstanding unsecured debts.

A Chapter 13 bankruptcy provides options to overcome overwhelming financial issues. You may qualify to restructure your debts and improve your situation while you work and earn income.

The payment-plan timeline generally depends on how much income you earn each month. If you receive less than the average monthly income of a Maryland resident, a payment plan may last three years. If your monthly income is higher than the state’s average, a plan can last no more than five years.

Documents needed to determine a payment plan

When preparing your bankruptcy petition, your filing needs to include documents verifying your income, debts and expenses. Tax returns, recent paycheck stubs and other sources of income show your ability to enter into a payment plan.

The total amount of your Chapter 13 monthly payments must still allow you to cover your basic living costs, which the court also needs to know. Copies of your utility statements, leases and day-to-day expenses, such as groceries, medicines and transportation, provide the court-appointed trustee with a picture of how much you could reasonably afford.

Chapter 13 bankruptcy and mortgage payments

One of the benefits of Chapter 13 is that it generally allows petitioners to keep their primary residence home. The court reviews a schedule of all your assets and your liabilities, such as your residence and a mortgage note, before approving a workable arrangement. 

If you find yourself struggling with your mortgage payments, you may find that a three-to-five-year payment arrangement works to your advantage. While you may not have the same amount of discretionary spending available, relief may come from knowing that the court could discharge the remaining debt balances after you complete your payment plan.

What are some of the important differences that exist between Chapter 7 and Chapter 13 bankruptcies?

Chapter 7 bankruptcies

Per Quicken Loans, Chapter 7 bankruptcy may be a good option for you if you do not have enough money available to you to pay back at least part of your debts. To move forward with this type of filing, you have to first pass a means test that determines eligibility.

The means test compares your household income against the median household income in Maryland. Depending on circumstances, you may also have to summarize your expenses and compare them against your income to find out if you qualify for Chapter 7.

Chapter 13 bankruptcies

If you do not pass the means test, or if you have concerns about having to surrender your home or vehicle, you may want to consider a Chapter 13 bankruptcy. This type may be appropriate for your situation if you have at least some money to put toward outstanding debts.

With a Chapter 13 bankruptcy, you restructure your debts so that they become more manageable. As long as you keep up with your repayment plan, you may be able to keep your personal assets when you file for bankruptcy using this method.

While filing for bankruptcy doesn’t always result in a lower credit score, it can make it that much more challenging to get new lines of credit in the future. Depending on the type of bankruptcy you file, a bankruptcy will remain on your credit report for a considerable amount of time.

Chapter 7 versus Chapter 13

The chapter of bankruptcy you choose will determine how long it will remain on your consumer credit report. Chapter 7 bankruptcy liquidates all of your non-exempt assets and uses the proceeds to discharge your outstanding debt. Chapter 7 bankruptcies will remain on credit reports for 10 years.

Chapter 13 bankruptcy, or reorganization bankruptcy, requires you to repay a portion of your debts over a three to five-year period. Because you are still making partial payments to pay off debt, Chapter 13 bankruptcies only remain on credit reports for seven years.

Rebuilding credit after bankruptcy

While it’s rare for bankruptcy not to damage your credit score, in many cases, it’s not your poor credit rating that makes it challenging to rebuild your credit. Unfortunately, some lenders will not approve a loan to anyone who has a bankruptcy on their credit report.

But while establishing new lines of credit may indeed be difficult after you file for bankruptcy, it doesn’t mean that it’s impossible. There are many ways to rebuild credit after bankruptcy – including applying for a secured credit card. With consistent and on-time payments, the impact of your bankruptcy will gradually lessen and you will become a better candidate for lenders.

The bottom line

Bankruptcy can hit your credit score hard, but the damage can be undone. By practicing responsible spending habits and staying within your means, you can take full advantage of your fresh financial start.

The current economy is creating financial hardships

As the U.S. labor market took a nose-dive earlier this year, many Americans have lost their jobs. According to the Bureau of Labor Statistics, the country’s unemployment rate now sits at approximately 13.3%.

Despite a recent decline in consumer bankruptcies, one report says there could be a wave of new claims soon. Even with the recently enhanced unemployment benefits, many jobless Americans are relying on credit to get by, increasing their future debt burdens.

Can bankruptcy get me back on the right track?

When consumers are facing crippling debt, Chapter 13 bankruptcy can be a viable option. These are a few of the benefits it can provide:

• It can allow people to keep their homes.
• It can allow people to discharge some consumer debts.
• It can allow people to discharge certain tax debts.
• It can allow people to get on an affordable debt repayment plan.
• It can save people thousands of dollars in late fees, penalties and interest payments.

Countless Americans are struggling during these uncertain times. And if they’re financially overwhelmed, there is help available. Those looking to file for bankruptcy may benefit from the assistance of a trusted legal partner. They can help consumers understand the filing process and what their life could look like moving forward.

One major concern for many who consider bankruptcy as a viable option may pertain to the liquidation of assets. However, unlike Chapter 7 bankruptcy, Chapter 13 may allow a person to maintain possession of all his or her assets while repaying certain amounts of debt over a given period of time. To be eligible for a wage-earner plan, a person may need to show that his or her income is sufficient to make the required payments according to schedule.

A person must also set forth a plan to pay certain amounts of debt before the process can begin. The length of the plan will be determined by one’s income. Those with a higher average income than the state median must propose a five year plan, while those who make less than the median must propose one that is three years long. Once the process is completed, any remaining debts that are eligible may be discharged by the court.

While a person who is experiencing substantial financial concerns may wish to pursue relief through a wage-earner plan, knowing the ins and outs of eligibility and what to expect from bankruptcy can be challenging. Prior to deciding on a path, a person in Maryland could find it beneficial to speak with an attorney for guidance in better understanding the process. An attorney can assist a client in choosing the correct path for relief and subsequently assist him or her in navigating the process.

Filing for bankruptcy will inherently have an impact on a person’s credit, and while this may make it more difficult to rent or buy a home, it doesn’t necessarily make it impossible. Landlords and lenders may take one’s credit score into account when determining eligibility, but they may also consider additional factors as well. For example, when attempting to rent a home, if one can provide letters of recommendation and reference from a current landlord or other viable sources, the process could be much less difficult.

After filing for Chapter 13 bankruptcy, an individual may also be eligible to apply for a mortgage through the Federal Housing Administration provided certain conditions are present. This may include documentation of satisfactory performance of financial obligations for up to one year of the agreement. In addition, one may also need to obtain written permission from the bankruptcy court to pursue a new mortgage.

While renting or buying a home could seem somewhat more challenging under these circumstances, continuing to struggle with debts in favor of avoiding certain outlets for relief could prove much more detrimental. When facing financial hardships, a person could speak with a bankruptcy attorney for advice on the benefits of a wage-earner plan. An attorney can provide a client in Maryland with advice on each available option, as well as their potential outcomes, and assist in pursuing relief from debts through the necessary outlets.

Source: realtor.com, “After Chapter 13 Bankruptcy, Can You Still Rent or Buy a Home?”, Jeanne Sager, Accessed on Oct. 10, 2017