Debt is often stressful and may end up becoming overwhelming, especially under certain circumstances such as a medical emergency. If you are unable to pay your monthly bills and are facing debt collectors or the threat of foreclosure, one option to consider is filing for bankruptcy. There are different types of bankruptcy, and each one has unique requirements, challenges and advantages. If you have a steady income, you may be able to qualify for chapter 13 bankruptcy, which could save your home from foreclosure.
The website of the United States Court system provides detailed information about the different chapters of bankruptcy. According to the courts, another term for chapter 13 is a “wage earner’s plan,” because you must have a regular source of income in order to qualify. If you do have a steady income, filing for chapter 13 may allow you to develop a reasonable plan to pay off your debts within 3 years. In some cases, the court may approve a longer plan of 5 years.
Once you file and get approval for chapter 13 bankruptcy, you generally stop receiving communications from collections agencies. Chapter 13 may also put a stop to foreclosure proceedings on your home. If you have other secured debts, you may be able to extend them for the duration of the bankruptcy term. This could result in lower payments, which may be an additional benefit of chapter 13.
Under chapter 13 bankruptcy, you make all your payments to a single recipient: a designated chapter 13 trustee. The trustee then disburses payments to all your creditors according to the bankruptcy terms. With this setup, you do not need to have any contact with your lenders, which may significantly lower your financial stress.