You may not like the idea of going through a Chapter 7 bankruptcy, because it would potentially require you to turn over assets you’ve accumulated over time. You might not qualify for Chapter 7 based on your income or other circumstances. Instead, you may be hoping that a Chapter 13 bankruptcy will work for you.

With a Chapter 13 bankruptcy, you make payments over time. Usually, you’ll make payments for three to five years. After you meet the requirements of the bankruptcy, any remaining debts included in the bankruptcy are discharged.

Chapter 13 bankruptcy: The wage-earner’s plan

If you are earning too much to qualify for Chapter 7 bankruptcy and are in a position where you can afford a monthly payment on a portion of your debts, then Chapter 13 may be a good choice. If your monthly income is less than the applicable state median, then you will have this plan for three years. If you earn more than the applicable state median, then the plan is usually set up for five years. Due to the design of Chapter 13 bankruptcies, no one who qualifies will be asked to make payments longer than five years.

Can creditors contact you while you’re in bankruptcy?

No. While you are enrolled in the Chapter 13 bankruptcy plan, creditors will not be able to start or continue collection activities against you. If they do, then they are violating the law. You should refer any creditors who call you to your attorney.

Are there advantages to Chapter 13 bankruptcy?

Yes. Chapter 13 bankruptcy has some benefits that you should know about, including the potential ability to save your home from foreclosure. With Chapter 13 bankruptcy, it may be possible to cure delinquent mortgage payments and stop foreclosure proceedings.

A Chapter 13 bankruptcy is designed to help you reschedule your secured debts (this doesn’t include your primary residence’s mortgage). Those debts are extended throughout the life of the bankruptcy, so that you make payments on them over time. Essentially, Chapter 13 bankruptcy works like a short-term consolidation loan, but it has the added benefit of discharging any debts that remain following up to five years of on-time payments.

If you are interested in Chapter 13 bankruptcy, you may wish to reach out to your attorney. Have information regarding your current income and expenses, debts and collections on hand for your attorney, so you can review what kind of debt reduction or elimination options are best for your current situation.