How To Survive A Chapter 13 Bankruptcy

Foreclosures are the biggest reason that most people choose Chapter 13 bankruptcy rather than the more attractive Chapter 7. With Chapter 13, homeowners who face foreclosure proceedings can halt the legal actions by choosing this bankruptcy option.

Generally, new consumer debt is not allowed within a Chapter 13 bankruptcy. While this may sound restrictive, it's actually a good thing. Since you're unable to accumulate new debt, you will be completely debt-free by the end of your Chapter 13 repayment plan. Isn't that exciting?

First, the primary difference between Chapter 13 and Chapter 7 is that Chapter 7 will allow the court to enter your discharge order about 90 days after we file your petition. The discharge order means that you're no longer legally liable for all of your dischargeable debts (things like child support, alimony, court restitution and a few others are not dischargeable). You don't have to repay any of those debts. Chapter 13 requires you repay a certain amount of your debt back, depending on what your income and allowable expenses are. Your repayment period will last between three and five years. If you have any debt left at the end of that period, it will be discharged just like Chapter 7.

Due to the new laws, not everyone can file a Chapter 7. Chapter 7 is what many people assume when they think of bankruptcy, an avenue to completely wipe out debt and give you a fresh start. It is not necessarily 100% true that Chapter 7 will wipe out all debt, but it does give the consumer a much lighter burden to bear. The problem is that only people who have a small enough amount of disposable income can file Chapter 7. Disposable income is what is left over to spend after all monthly expenses have been paid. The Internal Revenue Service (IRS) is the organization that gets to decide what things should cost, so just because you pay a certain dollar amount, that does not mean the IRS will allow it. Only individuals who have less than $100 a month in disposable income by IRS standards can file Chapter 7. And beyond that, a Chapter 7 will not stop foreclosure indefinitely. Usually a lender will ask to have a foreclosure stay removed as soon as it is possible to do so.

Once bankruptcy proceedings begin, your creditors are no longer allowed to contact you or harass you for money. However, it can take some time for your creditors to get this information, which means you may still be getting irritating phone calls. This can add to the stress you're already feeling, but it doesn't have to.