Stuck in Perpetual Credit Card Debt? Free Yourself With Chapter 13 Bankruptcy

Sometimes it's easy to get into credit card debt,but hard to get back out. Circumstances such as a floundering economy or a failed marriage can leave an individual struggling just to pay the monthly interest on their unsecured debt.

Paying only the minimum payment on your debts means that the principal, or the amount you owe, never goes down, so you're stuck in a an ongoing cycle of debt. Filing for Chapter 13 bankruptcy protection may be your best bet for getting back on your feet and freeing yourself from this burden.

What kind of debt is covered by Chapter 13 bankruptcy?

This type of bankruptcy deals only with unsecured debt, which is debt that is not acquired for a specific item, such as a car or house. Unsecured debt includes debt such as credit cards and personal loans, which are not backed by any collateral.

Are there any provisions for secured debt that is in danger of repossession or foreclosure?

If you are approved for Chapter 13 bankruptcy protection, all collection efforts by creditors are put on hold until the case is resolved. You will be given an opportunity to arrange payment plans for any arrears that have placed your secured assets in danger of being repossessed. 

However, you must repay any arrears in addition to your regular monthly payments in a timely manner, or the arrangements are voided and the secured property can be repossessed by the creditors.

Are their qualifications for filing Chapter 13 bankruptcy?

This type of bankruptcy is called a "wage earners plan" because it requires the debtor to make payments to the creidtors based on the applicant's income. Depending on their come, payments will be made and distributed to creditors for either a three or five year period. After the period has ended, all remaining unsecured debt is forgiven.

Can a debtor keep their assets under a Chapter 13 plan?

If a debtor has substantial assets, such as cash or either real and personal property, some assets may need to be surrendered to repay creditors. However, if a debtor is forced to resort to Chapter 13 bankruptcy protection, it is usually unlikely that they have sufficient assets to repay their creditors or they would do so.

Nevertheless, debtors are allowed by law to keep a certain amount of assets. The amount of assets that are exempt and protected from seizure can vary from state to state. While some states adhere to federal guidelines on exempt property, others are more generous and allow debtors to keep more property.

Bankruptcy law can be complicated, so a Chapter 13 lawyer would be your best bet if you want to take full advantage of both federal and state provisions for helping you to get out of the endless cycle of debt without losing the few possessions that will get you through to your new life.