Chapter 13 Bankruptcy is the most common form of bankruptcy filed in the United States. Also known as Wage Earner's Plan, this form of bankruptcy allows individuals the opportunity to reorganize their debt, while retaining personal belongings and assets.

Although Chapter 13 Bankruptcy is available to any U.S. citizen, certain eligibility requirements must be met. Unsecured debts cannot total more than $307,675 and secured debts must be less than $922,975. Due to recent changes in bankruptcy laws, individuals who plan to file Chapter 13 are now required to obtain credit counseling from an approved credit counseling agency prior to filing.

Oftentimes people facing foreclosure opt to file Chapter 13 Bankruptcy in an attempt to stop the process. While it is true filing bankruptcy can temporarily halt the process, it does not guarantee you will avoid foreclosure.

A common mistake many people make when filing Chapter 13 to stop foreclosure is they do not realize they are still required to make their mortgage payments. Additionally, they will need to become current on the delinquent amount. If the individual does not have the financial means to pay both the current and delinquent amount, Chapter 13 Bankruptcy is not going to save their home.

Foreclosure isn't the only reason people file bankruptcy. There are times when life throws a curveball and your financial nest egg can turn to dust. A tragic accident that causes you to incur a temporary or permanent disability can wipe out your savings account in a matter of months. Loss of income can set you back quickly and leave you in a frightening position. You have to make a decision of whether to pay creditors or purchase medication or food.

Bankruptcy is a solution to life's curveballs. It can help to reduce or eliminate stress by reducing or extending payments and give you a little breathing room until you can get back on your feet. Unfortunately, many people took advantage of bankruptcy and used it as a way to write-off frivolous spending sprees. Today, financial records are thoroughly scrutinized. Requests from individuals who exhibit reckless spending habits will be denied.

If you can show just cause for filing bankruptcy and are allowed to file your claim, Chapter 13 can provide you with many benefits. A few of these include:

• Ability to reorganize secured debts.
• Lower amount you owe on secured debts.
• Reduce interest rates on secured debts.
• Opportunity to obtain credit counseling and learn how to better handle your finances.
• Eliminate harassing phone calls from creditors.
• Shield individuals from having direct contact with creditors.

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