In 2020, Florida bankruptcy courts took in over 20,000 bankruptcy petitions. Chapter 13 filings numbered almost 4,000.
The United States’ bankruptcy court calls Chapter 13 the wage earner’s plan. The plan enables individuals to develop a plan to repay part or all their debts. The filer proposes a repayment schedule to pay off creditors over three to five years.
Chapter 13 gives you the ability to save your home. If you are going through foreclosure, the process stops once you file your Chapter 13 petition using the “automatic stay.” Automatic stay is a provision that temporarily prevents creditors, collection agencies and others from pursuing debts you owe.
Something important to remember is that the automatic stay does not mean you can stop paying your mortgage. You must continue your payments or the mortgage company may ask the court to lift the stay to continue with the foreclosure.
Nonpriority unsecured debts become discharged in Chapter 13. These debts include:
- Credit cards
- Medical bills
- Personal loans not secured by collateral
- Some tax obligations
- Breach of contract
You may have to include some of these in your repayment plan, but they are not as important as the priority secured debts. The court may discharge any leftover amount at the end of the plan. Removing these debts may make the mortgage payment process smoother.
Filing for bankruptcy can have long-term effects. One of these repercussions is the damage bankruptcy does to your credit score. Plus, in most cases, the Chapter 13 bankruptcy may stay on your credit report for up to seven years.