Bankruptcy Options

Bankruptcy is a way for people who owe more money than they can pay right now to get a fresh financial start. Every person has the federal right to file bankruptcy. You may file individually or a married couple may file a joint case. When a bankruptcy case is filed, creditors are stopped from collecting debts or going forward with foreclosure or repossession.

CHAPTER 7 bankruptcy, often called straight bankruptcy, is designed to quickly wipe out unsecured debts without paying those debts. You may also wipe out secured debts, like a car loan or a home mortgage, if you give that property back to the creditors.

Keep in mind that no type of bankruptcy allows you to keep your financed car or home unless you continue to make payments on the debt. A creditor is not required to give you time to catch up on delinquent payments on your car or home unless you file Chapter 13.

CHAPTER 13 bankruptcy is designed to deal with secured debts like car loans or home mortgages. It is available if you have regular income from your job, government benefits or any other dependable source.

In Chapter 13, you commit to an affordable repayment plan over the course of three to five years. A repayment plan usually requires you to continue your regular car or home payment and pay something more towards any arrearages. You can also get rid of your other unsecured debt by paying as little as a penny on the dollar in your repayment plan. You make payments to a trustee who then pays the creditors according to your plan instructions.