If you find yourself overwhelmed by debt due to a divorce, job loss, a serious illness or another unfortunate life situation, you may want to file bankruptcy to find some relief. There are two main types of consumer bankruptcy that you can file: Chapter 13 and Chapter 7.
According to the U.S. Courts, when you file for Chapter 13 bankruptcy, you can make regular payments on a repayment plan to pay back a portion of your debts. These plans usually last between three and five years, depending on what the bankruptcy court decides. At the end of this period, the remaining total of your debts is no longer your responsibility.
Benefits of filing Chapter 13 bankruptcy
When you file for Chapter 13 bankruptcy, you can save your home from the foreclosure process. However, you must continue to make timely mortgage payments after the court assigns a repayment plan. Additionally, when you file Chapter 13 bankruptcy, your trustee makes payments to your creditors, so you have no direct contact with them.
Eligibility requirements for Chapter 13 bankruptcy
You can file Chapter 13 bankruptcy if the combined total of your secured and unsecured debts is less than $2,750,000. You must also not have filed for Chapter 13 bankruptcy or another type of bankruptcy during the previous 180 days.
The decision to file bankruptcy is a significant one, and you should approach this idea carefully if you feel like you cannot manage your current debts. Filing Chapter 13 bankruptcy, while it can provide a way forward financially, can impact your credit and have other consequences for your personal finances.