Bankruptcy Plans

• In the U.S., citizens can choose among a myriad of bankruptcy plans to help them renegotiate their debt obligations and regain their financial footing. Bankruptcy plans for individuals include Chapter 7 and Chapter 13.
  
  Chapter 7 entails the liquidation of most, if not all, of your assets. That means you can lose your possessions, including your home and car. Chapter 13 involves adjusting your debts through a repayment plan. You usually get to keep your home and car and other secured assets.
  
  

Amount of Assets

• Chapter 13 will be your best option if your ratio is high enough to pay the monthly payments. The Administrative Office of the U.S. Courts notes that any individual, even if self-employed or operating an unincorporated business, is eligible for Chapter 13 relief as long as their unsecured debts are less than $360,475 and their secured debts are less than $1,081,400.
  
  

Chapter 13 Repayment Plans

• For keeping your most valuable assets, you are required to enter into the repayment plan. Creditors can't start, nor continue, any collection efforts. The Chapter 13 plan usually spans from three to five years. According to the Administrative Office of the U.S. Courts, if your current monthly income is less than the state median, the plan will be for three years. The courts have the option to extend the amount of time. If your current monthly income is greater than the state median, the plan generally must be for five years.
  
  

Determining Your Debt-To-Income Ratio

• Your debt-to-income ratio is used to figure out how much of your income has to go toward paying your debt obligations. These obligations include car loans, credit card debt, mortgages and student loans. You should also include interest and taxes.
  
  To figure out your ratio, simply add up all of your obligations and divide that total by your gross monthly income.
  
  

Need For An Attorney

• The debt-to-income ratio is part of a test called the means test. Essentially this test says that if you have the means to pay off your debt, you will likely have to file for Chapter 13. There are many nuances involving exactly what is defined as debt and income under the bankruptcy laws, and that can throw your debt-to-income ratio out of whack. For that reason, it is imperative that you consult with a bankruptcy attorney before filing.