When deciding whether or not to file for Chapter 7 or Chapter 13 bankruptcy, often the choice boils down to the immediate finances. Chapter 7 bankruptcy usually requires a higher upfront payment, typically around $1,000 versus Chapter 13 may offer $0 deposit. Throughout the duration, Chapter 13 is more expensive, approximately $3,000, but many debtors are unable to produce the higher initial costs for the alternative, and Chapter 13 often allows the inclusion of the fees in the repayment plan. Unfortunately, for a significant portion of the population, this decision is costly with lasting effects on the credit for only short-term relief.
Debtors Below The Poverty Line Are More Susceptible to Relapse
The low initial costs of Chapter 13 bankruptcy is alluring for many individuals struggling to make ends meet. Armed with the dream of living in a home without collectors calling around the clock and having some money left over at the end of the month, many debtors turn to debt relief options. However, not all bankruptcy options are equal. Chapter 13 operates on a repayment plan, typically about five years in length. So long as payments are kept up to date, collectors are unable to harass clients. However, for the population living under the poverty line and struggling to make ends meet, about half make it through the first year, let alone five years, and the calls begin once more.