Get Out of Debt Guy

Is a Chapter 13 Bankruptcy a Smart Move for Me?

Posted April 7, 2014

WRAL Reader Question

Dear Steve,

I have about 22,000 in credit card debt. I make 47,000 a year. I am single, and I rent. I have a car where I'm current on my payments which are $311 a month.

My student loans are in deferment for now, will be $400 a month after they get out. When they are out of deferment, I won't have the money to pay my credit cards and loans as well as my living expenses.

Is chapter 13 a good option for me? What do you think is the best option?


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Dear Christine,

I don't think the question is if a chapter 13 bankruptcy is right for you but if a bankruptcy in general is. Some will have an antiquated knee-jerk reaction that bankruptcy should be avoided at all cost. But that's not a factually based opinion. The modern reality is bankruptcy is easy to financially recover from and actually increases your chances for a security clearance if you are buried in debt.

Filing bankruptcy is a legal way to discharge some debts so you can make ends meet and deal with higher priority debts.

The bigger issue here is you have student loans which may just be adding on interest and the balance may be increasing while in deferment. Deferment is never a way out of debt. In most cases it's like putting your debt into turbo and flying faster down a dark hole. We need balance to go down, not up.

There are a few major ways to rebalance your financial situation. You can increase your income, reduce your expenses, or a combination of both.

If you are unable to get your current loans out of deferment and pay all your obligations and save money each month at the same time, then you've got a huge problem and bankruptcy is a legal option to eliminate your credit card debt to make room for your student loan payments.

There are some types of loans that can be eliminated easily by bankruptcy but these are typically private student loans to vocational schools, loans to unaccredited schools, or loans that exceeded the cost of attendance. More details about these types of loans can be found here.


Steve Rhode
WRAL Get Out of Debt Guy

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About this Blog:

Steve Rhode has had careers in opthalmology, real estate and as the head of a nonprofit debt counseling firm. On his blog, he offers hard-won, free advice about getting out of debt, consolidation and making the right choices as you manage your money.