People file for bankruptcy for a lot of different reasons, including credit card debt, unexpected medical bills, failed business ventures and more. One of the most common reasons for Chapter 13 bankruptcy, though, is because people are trying to stop foreclosure and save their homes.
Chapter 13 bankruptcy utilizes a repayment plan. As such, you're still going to be obligated to pay off a lot of what you owe. It's not a way to instantly eliminate the debt, but to make it manageable and affordable over time.
There are many advantages to filing for Chapter 13 bankruptcy, such as the fact that it may do less harm to your credit score and the way you get to keep more of your assets, paying them off over time instead of liquidating them. Chapter 13 gives you a repayment plan that you can use to make your debt affordable again, rather than just eliminating it right away and using your assets to pay down as much as possible.
It’s been nearly a month since we compared Chapter 7 and Chapter 13 bankruptcy on this blog. As we said then, both are forms of personal bankruptcy, but they approach the issue in different ways, and most of the time one is a better fit than the other.