Stops Collection Activities

• The term "bankruptcy protection" refers to the legal barrier the bankruptcy court puts up between you and your creditors when you file a bankruptcy petition. Regardless of the type of amount of your debt, filing a Chapter 13 bankruptcy petition immediately invokes the "automatic stay." The automatic stay stops lawsuits, wage garnishments and foreclosures, in addition to less severe collection activities such as letters and phone calls.
  
  

Consolidates Debt

• The heart of Chapter 13 bankruptcy law is the creditor repayment plan. Chapter 13 offers you the chance to consolidate your debt into a single monthly payment, made through the court. Once the court agrees to the plan you create, your creditors cannot increase the amount due, add interest or late fees to your balance or modify the plan. Typically, a Chapter 13 bankruptcy results in a debtor paying creditors less than the amount owed. Some creditors may not receive any payment at all, based on the nature of the plan.
  
  

Protects Assets

• An important distinction between Chapter 13 and the more common form of consumer bankruptcy, Chapter 7, is that Chapter 13 protects your assets more significantly than Chapter 7. While you are allowed to claim certain property exemptions in Chapter 7, in Chapter 13 you don't have to surrender any property. Chapter 13 may therefore provide more value to you than Chapter 7 if you have a significant amount of property and possessions.
  
  

Discharges Debt

• Even if you have to pay your creditors in Chapter 13 bankruptcy, you will ultimately receive a discharge if you make your payments as required. At that time, the court will discharge any debt that you have not fully paid in your plan. However, the court may withhold your discharge even if you complete your plan if you are behind on any child support or alimony payments, or if you have not completed the required budget counseling course.