WHEN IS CHAPTER 13 BANKRUPTCY A GOOD THING?
A Chapter 7 Bankruptcy is what most people think of when you san "Bankruptcy". Chapter 13 bankruptcy deals with unsecured debts. If you are behind on your house or car chapter 7 bankruptcy will not help you keep those things.
Chapter 13 Bankruptcy is mainly used for people that have fallen behind on their house or car payments. It is a plan to alllow you to put the arrears in a plan and pay it back over the next 3, 4 or 5 years. The mortgage company repayment plan is usually to pay the arrears back (if any) over the next 6 months to a year, making it possible to catch up.
If the mortgage company has given up on you and has started a foreclosure action the filing of Chapter 13 Bankruptcy will stop the sale as late as the day of the sale.
If your mortgage company has refused or rejected you for a mortgage modification or the amount of money you owe the bank exceeds the value of your home (a condition called "being undeerwater"), Chapter 13 can be used to get the bank or mortgage lender to the table to discuss a realistic mortgage modification. While the Court cannot write down the balance of your mortage, many times the bank will be willing to voluntairly write down the principle.
In the process of helping you with your home mortage, your credit cards and other unsecured debts will be taken care of. The payment to them is based on what is called disposablle income. Whether after the term of your payment plan the creditors have received all, some or none of their money, the rest is discharged.
If you have fallen behind on your mortgage talk with a bankruptcy attorney to see how the laws can help you.