What is Chapter 13 Bankruptcy? Can I Use It to Avoid Foreclosure?

Chapter 13 bankruptcy is for employed people who need to claim bankruptcy: it allows them to set up a schedule of payments in order to repay their debts over a long time frame. With this type of bankruptcy, creditors will work with the person who has declared Chapter 13, and propose a three, four, or five-year plan for repayment in full of all debts.

There is no way to extend payments beyond the five year maximum when you are filing Chapter 13 bankruptcy: you must tightly adhere to the debt repayment schedule. Before you think about filing Chapter 13, think closely about your situation and what you can realistically pay each month. Make sure you can make the payments you’ve agreed to make: otherwise, you will not be able to look forward to a rosier financial future. Declaring bankruptcy always comes with a stigma, which includes a scarred credit rating and other detrimental effects: by keeping to your payment schedule and getting through the three to five year period in a responsible manner, you will take the first step towards restoring your credit and moving forward in your financial life.

If your monthly income exceeds a set median in the Chapter 13 rules, you will be forced to accept a five-year repayment schedule. Once you’ve filed Chapter 13, bill collectors and creditors will no longer be able to pursue you for outstanding monies: you will have some measure of protection under this bankruptcy type. If you are feeling harassed by creditor and bill collectors, and are desperate for a solution, Chapter 13 will provide you with the means to take care of your financial responsibilities to creditors, and also offer some respite from your worries and from phone calls and intrusions by bill collectors.

If you are concerned, as many American are at the moment, about the possibility of losing your home through foreclosure proceedings, you can gain some protection from filing Chapter 13 bankruptcy. Unlike Chapter 7, you can hang on to your home if you make your payments, the bankruptcy ruling will protect you from foreclosure. You must still adhere to all the rules and payments schedules outlined in your mortgage agreement: there is no way around making your regular, full mortgage payment each month. Still, you can be assured of not losing your home with this sort of bankruptcy, so it has advantages, particularly today, when selling a home is neither easy nor profitable, in most cases.

Not everyone can file under Chapter 13: there are hard and fast rules about your debt load: your debts must be less than $307,675USD. You secured outstanding debts must not exceed $922,975USD. If you fit within these parameters, you should take the next step and find out all the small-print details and rules about Chapter 13. Filing for bankruptcy and stressful, but it can be the beginning of a new, more positive future, free of nagging debt and worries. If you are sure your debts have spiraled out of control, and you don’t wish to lose your home and everything you’ve worked to achieve, Chapter 13 will represent to you a ray of hope. Many people file for bankruptcy and come back stronger in the end, having learned hard lessons that change their future spending habits forever. Here are some links that offer valuable advice about Chapter 13 bankruptcy:

 

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Posted on Oct 8, 2010