Liz Weston Interview: Is Chapter 13 Bankruptcy better than a Debt Management Plan?


Blake Brewer was recently interviewed by Liz Weston, an outstanding consumer affairs advocate, author, commentator, and now blogger at  She was providing insight to consumers about the pros and cons of the “debt consolidation” plans you hear advertised on radio and television.  The plans promote themselves as alternatives to bankruptcy.  Indeed they are, but you still need to understand the differences before you make a decision either way.  Weston’s article can be found here.

The Root of the Problem

Weston points out a fundamental issue:  If you are spending more than you bring in, you are creating an unsustainable burden for yourself.  Whether you join a debt management plan, file Chapter 13 bankruptcy or try to pay off the bills yourself, you must understand how much money is coming in to your household every month, what your fixed expenses and where you can opt to eliminate or reduce expenses.  Otherwise, any solution will be temporary, and you will soon be back in the same boat.

Debt Consolidation Options

Weston notes that consumers have options when it comes to finding ways to consolidate their unsecured debt.  They can take out loans against retirement funds, or take out equity lines of credit on their homes.  If neither of those is an option, they can apply for a loan through their bank or credit union.  For still others, there are the settlement companies, who advertise that they can get creditors to accept less than the full amount of the debt over time.  The problem there is the program is voluntary, and creditors can choose not to go along with the plan.  They can still sue the consumer, even as they are trying to go along with a settlement plan to pay off their debts.

Chapter 13 repayment plans

Chapter 13 debt repayment allows most of the attorneys’ fees to be “baked” into the consumers’ monthly repayment.  It also allows for repayment of unsecured debt with zero interest, which can save consumers a lot of money compared to the interest rates, overlimit fees and other charges credit cards collect.  It is also protected by the federal courts, so no creditor can opt out or say no to the plan.  During the plan, the automatic stay protects the consumer from phone calls, letters or law suits from the creditors.

If you want to see if a Chapter 13 repayment plan will work for you, then call me at 216-642-8234 and we can review options to see what makes sense for you.  This post, as always, is for general discussion purposes, and does not constitute legal advice.

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