How will bankruptcy impact your financial plans?

On Behalf of | Dec 6, 2019 | Bankruptcy |

Chapter 13 Bankruptcy is one way for Missouri residents to get control over their finances. However, if people are not careful, the holiday season can overwhelm debtors once again. Understanding the limitations of a financial situation is very important to remain financially strong during the holidays.

First of all, Chapter 13 bankruptcy revolves around a debtor’s disposable income. This means the debtor has disclosed all sources of income and bonuses to the court, including Social Security payments and interest on savings and investments. In addition to this, all expenses must also be disclosed. Disposable income is the money a person has left at the end of the month after covering all reasonable expenses. For many, this income could be used for buying gifts and planning trips during holidays, but for debtors, it means making court-ordered payments from that income for three to five years. But, does this mean that people need to give up celebrating for this time? Not necessarily.

Some banks offer Christmas clubs, requiring small deposits over a set amount of time. Similarly, entering into an automatic savings program, which deducts a set amount from a bank account every month, could leave people with a small windfall at the end of the year. It might also be possible to modify a Chapter 13 payment plan for a couple of months and reduce a payment for that time, but keep in mind this might mean the remaining payments will increase.

Knowing the limitations of a bankruptcy payment plan is important and essential to being able to enjoy the holidays. While celebrating might be limited over the couple of years people are making their payments and gaining financial independence, it is usually worth it in the long run to be debt free.

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Andrew Tarry