How to Manage Your Life and Your Money During Your Chapter 13 Bankruptcy

Congratulations! You’re probably wondering why anyone would be congratulating you for filing for bankruptcy.  You’ve done yourself a favor by taking the first step in rebuilding your financial life, while at the same time freeing yourself of the stress of managing debt. 

As you know, Chapter 13 is a payment-based bankruptcy that can take three to five years to complete.  If you’ve filed a Chapter 13, it means you’re paying off some of your debts in what’s known as reorganization. During your bankruptcy, the court allows you a set amount to live on and a court-appointed trustee divides the rest among your creditors each month.

Often times this means a very no-frills lifestyle. Sometimes it means changing the basics in your life, like how much you pay for monthly living expenses such as food, cable, and clothing to accommodate for the required bankruptcy payment.  In an effort to adjust to life during a Chapter 13 bankruptcy, I recommend that my clients save ANY additional money that they earn or receive during the case.  By saving, rather than squandering the extra money, the client is in a better position to pay for any emergency expense that arises without risking the success of their bankruptcy.  If, however, a client believes that they might have enough money to “pay off” their Chapter 13, I strongly urge them to contact their attorney before sending any of the money to the bankruptcy trustee to avoid a problem.