If you are unable to make any meaningful payments back to your creditors, you may qualify for straight bankruptcy, known as Chapter 7. Chapter 7 allows you to eliminate debts, bills and other financial obligations; and to keep all your property that is exempt under state or federal law. Chapter 7 gives a person the chance to get a fresh start. By filing Chapter 7, creditors are prohibited from contacting during your case and then also after the case, as your debts will have been eliminated. Chapter 7 may allow you to start rebuilding your credit fast.
Chapter 13, also known as debt consolidation or reorganization under federal law, is an alternative to Chapter 7 bankruptcy debt elimination. Chapter 13 is not a loan, rather it is a federal law that may require your creditors to take less money over a longer period of time. Chapter 13 is a powerful tool because it is federal law and backed by the U.S. Federal Court System.
Chapter 13 allows you to consolidate debts into one monthly payment that you can afford, while forcing creditors to accept repayment under the federal plan of reorganization. Additionally, most often your legal fees can be paid through your monthly plan payment.
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