BY: Atty. Ray J. Bulaon

Has your income been affected by the COVID-19 pandemic? If you are currently unemployed and have no resources to pay creditors, filing for Chapter 7 bankruptcy to wipe out your debts and start fresh may be the clear and only option. To file Chapter 7, you generally need to be able to show zero disposable income every month. But what if you had some disposable income but not enough to pay all your creditors? Is there a way to pay only based on how much you can afford?

If you are struggling to pay your bills due to insufficient income and/or excessive expenses, yes, there is a way to make your debts more manageable so you can sleep better at night. For individuals, it’s called Chapter 13. While every case is different, of course, let me explain in general terms how Chapter 13 works and how it might benefit you if you are in the situation I described above.

Chapter 13 is the section of the US Bankruptcy Code that allows individuals in the United States to reorganize their finances.  If you are having difficulty paying your debts (credit cards, medical bills, personal loans, taxes, late mortgage payments and property taxes- all kinds of debts), don’t despair. 

Chapter 13 can give you the relief that you need so that you can get back on track as quickly as possible.  Let me explain.

We all know how difficult it is to catch up once you start falling behind on debt payments. If you’ve experienced a reduction in income (example: reduced income from employment – or business, if you’re self-employed), Chapter 13 allows you to pay back your creditors (with the exception of a few types of debts, you will also pay 0% interest) over a 3-5 year period based only on the amount of your surplus income every month, not based on how much you owe. 

In Chapter 13, you also don’t need to worry about losing any assets you may have because you will keep everything and lose nothing. And if you are in business, you will be allowed to continue running your business as usual. This is another reason Chapter 13 makes more sense than Chapter 7- when you have assets that cannot be exempted in a Chapter 7 case (Most assets can actually be protected in Chapter 7 but this is not true for all cases where people have significant assets).

Chapter 13 immediately stops all collection actions against you. That means no more annoying creditor calls, collection letters and no marshals at your door. Once the court approves your proposed Chapter 13 plan, creditors are legally bound by the terms of the approved plan and cannot ask for more money.  Your bankruptcy attorney can review your monthly living expenses with you, analyze your income and help you propose a realistic payment plan that you can afford.  

In most cases, Chapter 13 is a far better alternative than trying to pay debts on your own or hiring a debt management company. This is because in Chapter 13, you cannot be sued by your creditors as long as you remain under court protection. And if you are being represented by an attorney, all creditor communications go to your attorney so that you do not have to deal with your creditors directly. 

ATTENTION HOMEOWNERS! Lastly, as a result of the pandemic, a lot of homeowners requested a mortgage forbearance from their lender and a lot of those are now coming due. Unfortunately, it has been frustrating for certain homeowners who are not getting straight answers from their lenders as to how to resolve the delinquency. While their account continues to be late, they are now at risk of foreclosure. If this describes your situation, Chapter 13 may be the best solution to protect your home. Chapter 13 stops all foreclosure proceedings and allows you to pay the lender slowly over the next 3-5 years as opposed to paying what the lender is demanding to bring your account current.

For a free evaluation of your case, please call our office at Toll-Free 1-866-477-7772 to schedule a free consultation.  ***NOTE: Due to the virus lockdown, I am currently offering consultations via phone or video. Please call the office to schedule your appointment with me. Questions? Email me at

(None of the information herein is intended to give legal advice for any specific situation.  Atty. Ray Bulaon has successfully helped over 5,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call RJB Law Offices at TOLL FREE 1-866-477-7772).