Chapter 13 bankruptcy (sometimes called the "wage-earner's bankruptcy") is designed to allow you to restructure your past due financial obligations into an affordable repayment plan. The repayment plan will include secured debts (such as mortgages and car loans). In some circumstances, it can include repayment of some of your unsecured debt (such as credit cards and personal loans). However, in the majority of Chapter 13 plans, your unsecured creditors receive little or no payment- the unsecured debt is simply discharged.
If you are behind on your home mortgage or car loan, a Chapter 13 bankruptcy is your best option to avoid foreclosure or repossession. By filing bankruptcy, you can stop a foreclosure or repossession immediately! The plan will allow you to catch up on missed payments, and put you in a a much better position to keep your home and car. Once your plan is filed, all creditors must cease collection efforts. This "automatic stay", stops your unsecured creditors dead in their tracks, freeing up more money so you can successfully complete your Chapter 13 plan.
Depending on your unique situation, the Chapter 13 plan can be structured to pay your secured debts and catch up missed payments over a period of time, usually between 3 and 5 years. So long as you continue making the plan payments, you are protected from any collection efforts for the duration of the plan. At the end of the repayment plan under Chapter 13, all unsecured debt is discharged. You can then resume making your secured debt payments directly to your mortgage or auto lender, just as you did prior to filing bankruptcy.
The eligibility requirements to file a Chapter 13 bankruptcy are fairly straight-forward. You must be United States resident some form of income (yes, unemployment benefits are considered income). You must also receive credit counseling from an approved credit counseling agency. If you've filed for bankruptcy before, you may file again under Chapter 13, but there are some limitations. If you previously filed under Chapter 7, you may file again under Chapter 13, if it's been at least four years since your previous filing. If you filed under Chapter 13, you may file again so long as it's been at least two years since you filed your previous case.
Because of its ability to stop foreclosures and prevent car repossessions, Chapter 13 can be a very powerful tool to help you keep your home and car during these turbulent economic times. If you are facing a foreclosure or repossession, don't wait until its too late. Speak with an attorney now! A Chapter 13 bankruptcy may be the help you need to get back on your financial feet.