If you have filed a Chapter 13, you have encountered the Chapter 13 Plan. This is the repayment plan for your debts that must be submitted as part of the process in a Chapter 13. The plan, once accepted by the bankruptcy court, governs virtually all aspects of your economic life.
If your bankruptcy is successful, a Chapter 13 plan should provide you with more than a discharge from the majority of your debts at the end of the repayment period. It should provide you with a template to create a successful household budget. Because you have to account for all of your expenses in the plan during the bankruptcy, a budget developed for your plan should be just as useful after your bankruptcy.
Chapter 13 Bankruptcy Can Help with Mortgage Problems
Many people file a Chapter 13 because of mortgage problems and the threat or actuality of a foreclosure. The helpful element of bankruptcy is that it stops the harassing creditor phone calls and collections notices and a Chapter 13 plan allows you up to five years to cure all of your mortgage arrears. It also can help you eliminate much of your credit card debt, which frees up more cash to pay towards your mortgage arrears.
Can You Truly Afford Your Home?
An important element of a successful budget is ensuring you can truly afford your home. If your mortgage payments are too high, it takes money that you could otherwise use for retirement savings or paying your own school loan debt.
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Given the still unsettled job market, many homebuyers should avoid buying too much mortgage that could leave them "house poor" and at risk of falling behind in payments should one or both spouses lose a job or have their hours cut.
And if it does happen, a Chapter 13 may be able to help you save your home.
Source: Wall St. Cheat Sheet, "Does your home fit your budget?"
