How Chapter 13 bankruptcy works

Chapter 13 bankruptcy is often their best option for debtors who decide to stop collection efforts from their creditors but still want to repay their debts. People who have fallen behind in their mortgage payments often choose this option because it allows them a chance to "catch up" before their home is foreclosed upon. Filing for Chapter 13 will stop the collection efforts of all the creditors that the debtor lists on the petition and it allows them a variety of options for repayment, if they meet the eligibility requirements.

Keeping the home in a Chapter 13 bankruptcy may not be the best solution for everyone. If your mortgage payments are too high or you're upside-down in your home loan, then you might be better off moving somewhere more affordable. On the other hand, if making the mortgage payments is within your means but you just fell behind, then a Chapter 13 might be the only way to save your home.

If you've started thinking about bankruptcy, you should know that whether or not to file is just one of the decisions you'll have to make. There are others, like whether or not you should file with your spouse. But another important one is whether or not you should file Chapter 13 or Chapter 7 bankruptcy. There are good reasons to file Chapter 13 instead of Chapter 7, and I wanted to share some of them.

If it is still decided that bankruptcy is necessary after taking the credit counseling course, one must decide what type of bankruptcy to file. Both categories of bankruptcy will cost money and leave a scar on credit, but the key to deciding is looking at the individuals situation. Both types of bankruptcy will also put an automatic stay protecting the debtor from creditors and from having property taken out from under them. However, there are a few things that a stay may not always cover and creditors can occasionally ask for stays to be removed. So check with your attorney about what can be protected in your individual situation.

Bankruptcy can feel like the end of the world, but it isn't. There is life after bankruptcy. There will be times that you feel like you failed. This is normal, but don't let these feelings weigh you down. You're doing the best you can now and making an effort to pay your debts.

If you filed for Chapter 7 in the past eight years, you cannot file again, so you have to file for Chapter 13. In that case, if you have a lot of equity in your home and it is not exempt, you would propose plans to the trustee saying that you would like to keep your home. In return for keeping your home, you would make payments every month.