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Personal debt repayment plan vs. Chapter 13 repayment plan

For many Wisconsin consumers, January is the month when holiday spending on credit cards must be faced. It is also the time when many people commit to proper debt management in the New Year. However, taking charge of overwhelming debt is never easy, and professional help may be required to work on drafting a workable debt repayment plan.

It is not uncommon for consumers to be so focused on paying creditors that they forget to look after themselves and their families. Some suggest that a repayment plan must include allocations for an emergency fund as well as health, home and life insurance. Such a plan must contain attainable goals that are easier to reach, rather than goals that are beyond reach, leaving the consumer discouraged and then giving up too soon.

Clever marketing tactics sometimes convince individuals that there are ways to obtain instant riches to solve debt problems. Sadly, many people get caught in gambling, multi-level-marketing plans or other methods that typically only serve to worsen the situation. Also, with limited funds available, paying down significant amounts of debt may take years to do, while the threat of repossession, wage garnishments and even foreclosure is never far off.

If a consumer is unable to work out a debt repayment plan that will resolve debt issues in a short time, they may want to explore the protection that is offered by the U.S. Bankruptcy Code. An experienced Wisconsin bankruptcy attorney can explain the different options and can explain about the means test that determines for which bankruptcy chapter the client qualifies. Under Chapter 7, credit card debt can be discharged, but some assets may be liquidated; Chapter 13 offers the opportunity to pay debts over three to five years on a court-approved repayment plan without the threat of liquidation. One difference between a Chapter 13 repayment plan and a personal repayment plan is the fact that an automatic stay goes into effect that stops all debt collection actions by creditors as soon as a person files for bankruptcy.

Source:, "The 10 commandments of personal finance", Andrew Housser, Jan. 19, 2016

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