There are multiple types or chapters of bankruptcy. Chapter 13 bankruptcy is frequently also known as reorganizational bankruptcy and also as a wage earner's plan. It can be used by individuals as well as unincorporated businesses. This allows the filer to structure a repayment plan for their financial obligations which is supervised and approved by the bankruptcy court. Under this plan, you are given a period of time, typically three to five years, to get your debt repaid. After you have filed, your existing creditors cannot call or harass you, and are not permitted to start collections proceedings against you.

This type of bankruptcy may be better suited for some people, although each case is different. For example, with Chapter 7 bankruptcy, the consumer's debt is almost completely eliminated. While this sounds like good news, the caveat is that your assets will be sold in order to repay the debt. By contrast with Chapter 13, while your debt remains, it is reorganized so that you can comfortably make payments and you are allowed to retain your assets.

While many people may view Chapter 13 bankruptcy as a debt consolidation loan, it really is not a loan in any sense of the word. The debt remains, only a restructured repayment plan is defined and the money is distributed to the creditors via a trustee appointed by the courts. Although the consumer no longer has a contract with the creditors, the fact that the debt still exists cannot be overlooked. Certain types of debts are given a priority and must be paid in full.

This type or chapter gives homeowners the opportunity to keep their house from being foreclosed on. Once chapter 13 bankruptcy proceedings begin, a foreclosure procedure may be stopped and over time, delinquent mortgage payments may be cured. However, homeowners must still make all monthly mortgage payments during the time of the bankruptcy.

Another advantage of chapter 13 bankruptcy is that secured debt can be rescheduled. By doing this, an individual may actually lower their overall payments, making it easier to repay their debt.

Chapter 13 bankruptcies can be used for an individual or an unincorporated business or self employed person can file chapter 13 bankruptcy, with limitations. The total amount of unsecured debt must be less than about $307,000 and the total amount of secured debt must be less than about $923,000. These limitations are periodically adjusted according to the consumer price index.

Before you are eligible to file bankruptcy, you must first go through credit counseling. The credit counseling must be through an agency that is approved by the United States Trustee's office. Although the companies may charge a fee for their services, if you are unable to pay their fee, they must reduce the cost and make adjustments for your individual situation.

If you need some financial breathing room that does not require liquidation of your assets, Chapter 13 bankruptcy may be what you are looking for. A workable repayment plan is arranged so that you can repay your debts. Although bankruptcy is not something you want to do, it might be the answer if you find yourself with an overwhelming loan of debt that you cannot see over the top of.

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