Can I Save Money During Bankruptcy?
As a consumer bankruptcy attorney, I am often asked: Can I save any money during my bankruptcy? Well, if you filed a Chapter 7 case, this really isn't an issue. If you filed a Chapter 13 plan of reorganization, you will probably be in the bankruptcy for three to five years. The simple answer is: No, you aren’t supposed to save money; however, that is not realistic. In a chapter 13 bankruptcy, a debtor must pay to the bankruptcy trustee all of his disposable income for 3 to 5 years. Continued reasonable 401K contributions are considered an acceptable expense, but most other forms of saving money is prohibited.
Clients frequently ask, “How am I going to get a fresh start without saving?” True. It is difficult. At the same time, however, a debtor can wipe out $250,000 of debt by simply paying $400 a month for 60 months. The fresh start comes with the ability to force your creditors to accept pennies on the dollar for debts. The fresh start comes at the end of the bankruptcy when a debtor emerges free from the stranglehold of debt.
“What if my car needs or I have an unexpected expense? I need to save to pay for it.” This is another common concern. Bankruptcy law has a mechanism to deal with this common occurrence. In many cases, the bankruptcy payment can be forgiven for a period of time to let a debtor deal with unexpected expenses. The key is to let your attorney know about it as quickly as possible.
This blog was written by Jeremy Iskin, Esq. of The Dellutri Law Group, P.A. Mr. Iskin practices Bankruptcy Law at the firm.
