Bankruptcy: The Basics of Chapter 13

Are you struggling with a debt that is tearing you down but still have some stable income? There’s hope for a fresh start in filing for chapter 13 could be your relief.

But what’s bankruptcy?

Bankruptcy is a legal provision allowing you to pay some or all your debt for an agreed period-usually 3-5 years. You will retain your assets in this case, and you can continue making payments, or your debt is eliminated.

Bankruptcy is in two forms; chapters 7 and 13, and your choice depends on your desired outcome or financial situation.

Chapter 13 gives you the leeway to repay all or some significant portion under a court-ordered plan in three to five years. Most of the discharged debts in chapter 13 are personal loans, medical bills, and credit card debts.

If the court okays debt your repayment plan, creditors will be forbidden to do any collection. That also gives you relief from a barrage of calls and letters from collection agencies.

Chapter 13 may look simple to the ordinary eye, but you must seek advice to understand its provisions before you jump into it.

Difference between chapter 13 and chapter 7?

Chapter 7 bankruptcy erases all qualifying debts like medical bills, personal loans, and credit cards after 3 to 4 months. After you file, your creditors are served with what is called an “automatic stay. This stops them from pursuing the debt and any collection efforts.

With such, you don’t pay back your creditors, but instead, a bankruptcy trustee is appointed by the bank to sell your non-exempt property. That way, you’re able to protect most of your household belongings. But if you don’t have any assets which can be sold, the creditors receive nothing. It’s such a swift process that allows you to get back on your feet quickly.

Chapter 13 is more involved, and here you can restructure your debts and catch up. If you have assets that you don’t want to lose, chapter 13 is ideal for you. Once you clear all the payments required, then you’ve your debts discharged.

The family home and Chapter 13

In a time of crisis, chapter 13 is ideal for saving your family home. Late interest and fees payments can add up very fast, and you could easily fall behind, thus risking foreclosure due to a missed payment.  Chapter 13 is structured in a way that allows you to pay the late fees and interest in overtime and, therefore, no pressure of paying a lump sum as your lender demands.

Bankruptcy and foreclosure

Every state has its guidelines on foreclosure. If you’re not paying your mortgage as agreed in the offer letter, then the lender can begin the recovery process, something that can easily destabilize you. He could sell your assets at an auction and recover their costs. When facing a disclosure, in most states, the lender requires a court ruling to initiate the process, while in others, they don’t. So the most important thing is to get an experienced bankruptcy attorney here that will help you file for bankruptcy at the very beginning.

Do not just sit and suffer the heavy penalties and the painful recovery by the lender.  Bankruptcy has far-reaching implications, but for you to protect your assets and family home, then you can file for bankruptcy through a reputable bankruptcy attorney.


Sudarsan Chakraborty is a professional writer. He contributes to many high-quality blogs. He loves to write on various topics.