Since the passing of the 2005 Bankruptcy Code, Chapter 13 bankruptcies are now being filed at the lowest rate since the law was amended. After changing the code, Congress is wondering what is happening. First of all, you need disposable income for a Chapter 13 bankruptcy plan, and with the recession in full swing many more people are out of work. One of the main reasons for filing Chapter 13 is the protection in the equity of your property, but nowadays many individuals are upside down on their family home. This combined with having to spend five years to bring your mortgage current can be a downside to this chapter of filing. If the same individuals can qualify for Chapter 7 and discharge all their unsecured debts they would rather not pay for five years under a Chapter 13 payment plan.

With the new bankruptcy law being in effect for five years, a debtor in most cases is required to reaffirm their secured property debts. Prior to the 2005 Bankruptcy Code filings you did not have to make a choice. Lenders used to be content accepting payments from the debtors and the individual was happy because they got to keep their valued property. The only benefit for a bankruptcy filer to reaffirm is to get credit for continuing to make their payments regularly which in turn helps their credit scores come back quicker post bankruptcy. When you reaffirm a debt in bankruptcy now, you eliminate the protection from bankruptcy and that debt carries on with you until it’s paid off. When it comes to a home loan and you reaffirm, you will have future liability on your property. If you can get away with not reaffirming your home loan you won’t have any liability on the property in the future. This means if your property drops in value below what is owed you can walk away without the threat of being on the hook for a deficiency.

Although many people think so, bankruptcy is not a dirty word. It’s best to never have to file for bankruptcy. Sometimes solid people make bad financial decisions or they have circumstances beyond their control and filing bankruptcy is unavoidable. This is the reason why bankruptcy was created to help good people that suffer catastrophe like a job loss or a serious illness that puts their finances in a tailspin. In many cases filing for bankruptcy, will stop the creditors long enough to get back on their feet. Individuals are not abusing the system as long as they did not go into debt with the intention of wiping out their debt by filing bankruptcy. Remember, creditors that lent you the money took the risk that you might not be able to pay them back. If you’re behind on your bills already, your future credit need not be any worse after filing bankruptcy because of all the late payments. If you’re at the end of your wit’s trying to pay your bills filing for bankruptcy might give you the space you need.

The author formed DIY4LAW.Com that specializes in Chapter 7 and Chapter 13 bankruptcy and helps individuals with debt problems and helping stop foreclosure by putting them in touch with a local bankruptcy attorney. Check our website for more answers to bankruptcy questions