Filing Chapter 13 bankruptcy is a formal court process which allows you to keep your property while ensuring that your creditors are repaid. Some debts must be repaid in full, some in part and others will be written off in full. The repayment plan is usually structured over a three to five year period. If your unsecured debt exceeds $269,250 or your secured debts are over $807,750, you cannot file for Chapter 13 bankruptcy.

When you file for Chapter 13 bankruptcy you will also file a repayment plan. In addition to this you must attend a creditor’s meeting and confirmation hearing. At this hearing the judge will accept or reject your plan. If the plan is given the all clear you will make the payments to a court appointed trustee. Filing for Chapter 13 bankruptcy means you have limited control over your personal finances.

When the three to five year period is over, any unpaid balance on dischargeable debts is written off. If you are struggling to stick to the repayment plan due to illness or job loss the trustee can change the plan. The court also has the option of granting a hardship discharge in certain circumstances. If you think you are going to need help, contact your trustee without delay to rework the terms of your Chapter 13 Bankruptcy.

If you absolutely cannot repay your debts and the bankruptcy court will not let you alter the plan or offer a hardship discharge, converting to a Chapter 7 bankruptcy is an option. You may also request that your Chapter 13 bankruptcy is dismissed. This means that you still owe your creditors money apart from what you have already paid under the repayment plan.

Under Chapter 13 bankruptcy certain debts cannot be discharged. These include:

* Any debt not listed in your bankruptcy papers
* Child support and alimony
* Debts for personal injury or death caused by driving while intoxicated
* Most student loans
* Fines and penalties imposed for breaking the law, such as traffic tickets and criminal restitution
* Most tax debts are not dischargeable under Chapter 13 bankruptcy.

There are some good reasons for choosing Chapter 13 bankruptcy over Chapter 7. A Chapter 13 bankruptcy will remain on your credit record for a period of six years. This is in contrast to a Chapter 7 bankruptcy that will be reflected on your credit record for ten years. If you are able to stick to the repayment plan many creditors will be happy to grant you further credit in the future.

However if you are able to avoid filing for Chapter 13 bankruptcy this is obviously the best option. Consumers should try to avoid needing to file for bankruptcy by practicing effective money management skills. This includes avoiding impulse buying, overspending on credit cards and buying a house and car you can’t easily afford. Too many consumers get into debt over their heads. All it takes is an illness or job loss and you could see yourself heading for the bankruptcy courts faster than you can say “bad debt”.