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Are you buried in debt? If so, you’re certainly not alone. Many Americans are trying to juggle bills and payments, negotiate with creditors and avoid losing their homes. For some, the negative connotations often associated with bankruptcy will keep them from looking into this option. However, a Chapter 13 bankruptcy may be the right answer for some who are experiencing significant financial difficulties.

Chapter 13 is different from Chapter 7 bankruptcy. Chapter 13 allows a person’s debts to be reorganized. For some homeowners who find themselves dealing with foreclosure, Chapter 13 provide some relief from debt and still help people keep their homes.

Because of the housing crisis, many second mortgages became unsecured debt. When that happens, Chapter 13 bankruptcy can erase that because Chapter 13 requires filers to pay back debt over a period of three to five years. When people don’t have to worry about paying on the second mortgage amount, they may find that it’s easier to meet the terms of the repayment plan.

Because of the bankruptcy reforms in 2005, there is now a means test for Chapter 7. Those who do not meet the income requirements for Chapter 7, which is liquidation, can file for Chapter 13 bankruptcy. Traditionally, those filing for Chapter 13 are often not successful in completing the repayment plan. However, the housing bust lowered home values, making it easier for people to make payments in a Chapter 13.

Bankruptcy may not be a good choice for all people; however, the advice of an experienced bankruptcy attorney can prove invaluable. Understanding which bankruptcy will best suit your needs is the first step toward financial freedom.

Source: Orlando Sentinel, “Personal bankruptcy: 13 not so unlucky anymore” Richard Burnett, Jun. 06, 2014