Filing a Chapter 13 Bankruptcy Can Halt Foreclosures and More

If debt is dragging you down, there are multiple options for filing for bankruptcy protection Chapter 13 does not discharge most unsecured debts like Chapter 7 bankruptcy, but it does stop collection calls and allows debtors to resolve both secured and unsecured debts through court-approved structured repayment plans. Other advantages of filing for Chapter 13 can include stopping an in-process foreclosure, which could save debtors from losing their homes.

What is a Chapter 13 Bankruptcy?

A Chapter 13 bankruptcy allows single or married people with steady incomes to restructure and repay their debts, both secured and unsecured, through a court-approved plan. The plan length cannot exceed a three to five-year period, during which debtors must make regular installment payments to court-appointed bankruptcy trustees. The bankruptcy trustee then divides the installments among creditors as appropriate. Creditors may not begin or continue to collect money from people who have filed for Chapter 13 bankruptcy.

How Do I Know if I Am Eligible?

Anyone with a regular income may file for Chapter 13 bankruptcy. The income requirement applies not only to employees with a paycheck, but to business owners and the self-employed.

However, there are limits on how much debt filers may owe. Unsecured debts must be less than $360,475 and secured debts must be under $1,081,400. Debtors must also have received court-approved credit counseling 180 days prior to filing a Chapter 13 bankruptcy petition. Creating a debt consolidation plan during counseling is not mandatory, but if one results, it must be filed with the court.

Why File for Chapter 13?

There are multiple advantages to filing for Chapter 13 bankruptcy. When the Chapter 13 petition is filed, this stops all collection activities and removes the necessity for filers to deal directly with creditors. Debtors can reorganize both unsecured and secured debts to help lower monthly payments and pay off all debt as part of their bankruptcy repayment plan. In addition, people who are already in default on their mortgages and in foreclosure are often able to stop foreclosure and save their homes by filing for Chapter 13 bankruptcy.

Who Can Answer Chapter 13 Questions?

For anyone considering bankruptcy as an option, help is available. Bankruptcy laws are complex and involve many issues of eligibility and exemptions. Debtors should consult experienced bankruptcy attorneys in their states to answer any questions about filing for personal bankruptcy, whether Chapter 7 or Chapter 13. It is especially important to seek the help of a legal bankruptcy professional when financial problems like foreclosures are already in process, which can complicate filing for Chapter 13 and call for swift action.