Filing for bankruptcy is often seen as a last resort, mainly because of the consequences many see it as having. Many people believe that going through a bankruptcy will result in you losing your home, car, other important possessions and being left with a terrible credit report. However, this is not true. The key lies in choosing the type of bankruptcy that is right for your particular situation.
If you want to avoid foreclosure (losing your home) and a bad credit report, then it is likely that filing for Chapter 13 bankruptcy is the right choice for you. If you are late on your mortgage repayments, filing with Chapter 13 can actually halt foreclosure proceedings for a period of time and can help you to get back on track with your mortgage repayments.
The way that Chapter 13 bankruptcy works is that the debtor pays a certain amount (based on their income) to a trustee. This will create a fund that can be used to pay off certain debts.
Another notable benefit that Chapter 13 has over other bankruptcy options such as Chapter 7 is that it limits the amount of time that bankruptcy is shown on a person's credit report. When filing for Chapter 7, it is shown for 10 years, but claiming Chapter 13 will only show for 7 years.
Filing for bankruptcy is never an easy decision to make, however, it can often be the best option in order to help you to get back on track with your finances. If you have any questions about the implications of bankruptcy on your credit report, you should speak with a legal advisor.
Source: Findlaw, "The benefits of chapter 13 bankruptcy," Oct. 06, 2017