If you do not have any way to repay your debts, bankruptcy is one option. Even though it is often considered the nuclear option when it comes to resolving your liabilities, there are times when it is the only option. If you file Chapter 13 bankruptcy, though, instead of Chapter 7, you can get some relief from debts while you continue to make payments. You also do not have to surrender any property, as you do with Chapter 7. Finally, it does not do quite as much damage to your credit score.
One of the requirements for Chapter 13 bankruptcy is that you undergo credit counseling. If you are in a situation where you need to declare bankruptcy, credit counseling might not be such a bad idea, anyway. The credit counseling can help you figure out the best way to manage your money, and the added motivation can help you stick to your repayment plans that are part of the bankruptcy filing. If you see the counseling as an opportunity, rather than a form of drudgery, you are more likely to get a lot out of it.
There are certain rules for the ratio of secured debt to unsecured debt when it comes to filing for Chapter 13 bankruptcy. The rules change frequently, which means that you want to consult with a bankruptcy professional to see if Chapter 13 is an option for you. Because of the specific ratios involved, this is a type of bankruptcy that is only open to some. The best way to proceed with this is to research the debt requirements and work to restructure your own liabilities as much as possible to suit the requirements.
A specific repayment plan will keep you in the good graces of your creditors and make approval of your application more likely. Some people view bankruptcy applicants as a collection of irresponsible people, because they have chosen not to pay their debts. Instead of living down to that stereotype, take the initiative to put your own debt schedule together. After you have done that, make sure you follow that schedule.
Chapter 13 bankruptcy offers you significant protections while you are in the plan. As long as you stay current with your repayment plan and follow any other conditions that you are given when your plan is approved, then you should not have any problems with regard to losing property or having any other unpleasant actions occur. Make sure, though, that you follow your plan to the letter. Creditors enjoy loopholes, particularly when the debtor is already at the point of bankruptcy.
After you have finished the plan, you shouldn't expect to run right out and secure approval for a mortgage loan, or even for a car loan with attractive financing. It takes a lot of time to rebuild your credit. However, taking the first step and applying for bankruptcy is the beginning of a long road back to financial health.
Completing a Chapter 13 bankruptcy program lets you start your financial life over without any debts.