The decision to file for Chapter 13 bankruptcy isn't one that is made lightly by filers. It usually takes a lot of debt and the exhaustion of all other options before most people file. Often, there are other circumstances that play a part in the need to use this protection.
One of the more common reasons for filing bankruptcy is that medical bills have become unmanageable. This happens in up to 60% of these cases. Divorce and unemployment also factor into some cases. When you file a Chapter 13 bankruptcy, you must be able to repay the debts, in whole or in part, in three to five years.
The court must approve the plan that you propose for repaying the debts. It uses a specific formula to determine what amount you will be able to pay with each check. For some people, such as those on a salary basis, figuring this out might be easy. It becomes more difficult if you have an unpredictable income, e.g., those who rely on tips or freelance.
Many people appreciate that you can roll your Chapter 13 bankruptcy fees into the payments that you make. This isn't possible if you have to file a Chapter 7 bankruptcy, which liquidates your assets instead of allowing you to make payments.
Another consideration is that your filing for bankruptcy won't protect any joint account holders unless they file for bankruptcy too. This might be a big factor in how you handle these debts since you might not want the joint holder to have to cover the entire bill. Just make sure that you consider all your options and plan accordingly.