Filing bankruptcy is not something that most people want to do, but there comes a time given the tough economy that Americans are currently experiencing, where an individual's credit card debt and mortgage payments get so far behind that bankruptcy is the only way out. With the mortgage meltdown in full swing and job loss numbers at an all time high, many people will be forced into filing Chapter 7 bankruptcy. But what if the debtor is still employed and wants to keep their property and their home? Filing Chapter 7 may put the debtor in danger of losing their property which scares many people away from filing in the first place. Chapter 13 bankruptcy is for individuals just like this. Chapter 13 bankruptcy is called the "wage earners bankruptcy". It was designed for people who are still employed, but have large amounts of debt that they are struggling to pay.
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When an individual files Chapter 13 bankruptcy, the individual can keep their property, unlike in a Chapter 7 where assets that are not protected can be sold to repay the debt. In a Chapter 13 bankruptcy the debtor still gets to enjoy the benefits of the automatic stay and works out a feasible repayment plan with their bankruptcy attorney that will last about three to five years. Once the payment plan is made and the bankruptcy petition is filed with the court, the court can then either approve the plan or orders changes to the plan. Once the plan is approved by the court, the debtor must make sure that they follow through with the plan as well as all other court requirements until it is completed. If during the repayment timeframe the debtor's financial situation changes, such as a decrease in income or an increase in expenses, they can contact their bankruptcy attorney and change the repayment plan with the court trustee that oversees the case to accommodate the debtor. Typically all secured debts are paid first by priority, such as a mortgage, and all unsecured debts get paid what is left. At the end of the Chapter 13 repayment timeframe, any unsecured debts that are left unpaid will then be discharged. This will allow the debtor a new financial start as long as they learn from their mistakes and don't repeat them. Filing Bankruptcy is not the end of the road, but a new beginning for a bright future for the individual and their family.
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