Filing bankruptcy is a good move to get protection under the law from collection agencies or lenders. While this is a rather large step to take, it can allow you to save yourself from financial ruin.
Making the decision to file can be difficult. You need to weigh the pros and cons. Understanding the protections that Chapter 13 offers can help you with making the choice to file.
The automatic stay
The main protection offered to you under Chapter 13 comes from the automatic stay. This is an order from the court that stops all collection activities against you. No lenders can contact you about payments or make you pay anything while the automatic stay is in effect. It remains effective until the court discharges your case.
The repayment plan
Chapter 13 is unique because it allows you to create a repayment plan for your priority debts. These include those you cannot discharge in bankruptcy and important ones securing assets, such as your mortgage. The plan takes into account your income and ability to pay. It will usually cover a three-year period during which your lenders have to honor the plan. Again, the automatic stay remains in place while you pay, so lenders cannot enforce collection efforts.
As long as you follow the court’s guidance and stick with your payments, you will continue to have protection under the plan. Plus, you get the perk of being able to pay off debts and keep secured property, which is one of the biggest advantages of filing Chapter 13.