I don’t ever sugar coat the realities of a chapter 13 bankruptcy. When you sign up for a chapter 13 you are in it for the long haul. Most chapter 13 bankruptcies I deal with last 60 months. Some are as low as 36 months, but most are 60.
The idea behind a chapter 13 bankruptcy is that you will devote your “disposable income” to your creditors for a five year period. The idea of turning over every spare cent for a five year period understandably causes most people quite a bit of concern.
Does this mean no extras? No recreation? No vacations? While you are working under a budget for sure, the budget allows for things like recreation and vacations.
In Arizona the Chapter 13 trustees who administer your chapter 13 bankruptcy case have provided an accepted budget that is based upon household size.
$225 Per Month for Recreation – And Possibly Significantly More
The budget provided by the chapter 13 trustees in Arizona allow for a $225 per month, per family, for the following:
Recreation, clubs, entertainment, cable TV, Internet access, newspapers, magazines, and personal care products and services
Further, the budget provides for $120 per month for the first family member and then $50 per month for each additional family member for miscellaneous expense. So, in a family like mine, my wife and six kids would have a monthly miscellaneous budget of $470.
This means that in my family we could have a monthly budget of $690 that could be used for discretionary purposes. This also means that families who are in a chapter 13 bankruptcy can plan ahead and still make that annual family reunion or traditional family vacation.
So, while chapter 13 bankruptcies do require planning and budgeting, that is not such a bad thing.