Not many people would classify going through bankruptcy as a religious experience. But when Lorene Whitehead received her Chapter 13 discharge last month, she celebrated with her prayer group.
"I rejoiced; it was such a wonderful thing," she said. "They just praised God with me. It was a blessing to be able to do this."
Whitehead, 58, says she got into financial trouble when nearby construction hurt business at her St. Petersburg restaurant, Lorene's Fish and Crab House. She struggled for years trying to avoid bankruptcy, but concluded it was the only way she could save her home and car.
"My home was getting ready to go into foreclosure," she said. "They had repossessed my Buick."
Whitehead's Chapter 13 filing saved both, allowing her to catch up on her missed payments and eliminate some of her other debts by paying $578 a month for five years.
"It was like lifting a burden," she said. "I had been getting phone calls all day long, and every day the mailman was bringing me bounced checks and creditors' bills."
Completing the plan wasn't easy. At one point, Whitehead got sick and fell behind in her payments, but the court gave her three months to catch up. Last month she completed her plan and got her discharge.
Most people who file for bankruptcy still do so under Chapter 7, which allows them to wipe out most debts relatively quickly, paying pennies on the dollar or nothing at all. But about 35 percent opt for a repayment plan under Chapter 13.
Some of them have no choice. The 2005 bankruptcy reform requires repayment plans for people with higher incomes. However, others choose Chapter 13 because it gives the time they need to catch up on missed payments and save a house or a car. Some even choose Chapter 13 because it allows them time to pay unsecured debts, such as medical bills, that they genuinely want to pay.
"We like to think of ourselves as the friendlier side of bankruptcy," said Hank Hildebrand, a Chapter 13 bankruptcy trustee in Nashville. He is part of the National Association of Chapter 13 Trustees, which is trying to educate consumers with debt problems about their options.
"You may not need bankruptcy," he said. "You may be able to deal with creditors directly, particularly if there are only one or two."
But he said consumers need to know that bankruptcy is available if they do need it.
"Many people don't understand that there is a way to repay their debts through bankruptcy," Hildebrand said.
However, a payment plan works only if you have the resources and the discipline to make the payments. About 30 percent of those who start a Chapter 13 plan complete it, Hildebrand said. Those who fail usually have the option of converting to a Chapter 7.
Chapter 7 may be a better option from the beginning for other debtors, particularly people who want to get out of homes or cars that are worth less than the debt attached to them.
Of course, everybody's situation is a little different, which is why it's good to get personalized advice from a bankruptcy lawyer.