Bankruptcy is a process that gives a you a financial fresh start, freeing you from overwhelming debt burdens. Chapter 7, also called "liquidation" or "straight bankruptcy," is what many people connect with a bankruptcy case.
Bankruptcy law forces creditors to stop all collection efforts against you as soon as your file. This mechanism is called the "automatic stay" and it's one of the main benefits of bankruptcy. Everything is put on hold, and you get much-needed breathing room.
Chapter 13 has also been called a "Payment Plan Bankruptcy". It is a way of having some or all of your debts paid back over time out of your wages. You get to keep all of property. the court accepts monthly payments from you for 3 to 5 years. Those monthly payments are used to pay your debts. The main reason you may choose to file a Chapter 13 is because you can catch up on mortgage payments and/or car payments on which you are behind as of the date of filing. This means you will not lose your house and/or car in Chapter 13, so long as you keep your payments current after filing bankruptcy. Another big benefit is stripping your 2nd mortgage or line of credit.
Give yourself a financial fresh start!