Many people struggling with unmanageable debt loads may give consideration to filing for bankruptcy. However, they may be hesitant to pursue this option because they believe they will have to give up some assets, like their home. This, however, does not always happen and the type of bankruptcy a person files may contribute to the ability to keep a home. 

Credit Karma explains that consumers may be able to choose between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy depending in part on their income and the nature of their debts. In a Chapter 7 bankruptcy, some assets may be at risk of seizure to repay debts. In a Chapter 13 bankruptcy, however, that does not happen. 

According to the United States Courts, a Chapter 13 bankruptcy is often called a wage earner’s plan because a person must have an income sufficient to support monthly payments to a trustee for 36 to 60 months. These payments, in turn, are used to repay some of the money owed to creditors per an agreement the trustee and court negotiate with the creditors. Chapter 13 plans are a form of structured debt repayment. 

For people who own homes, the filing of a Chapter 13 bankruptcy places an automatic stay on any foreclosure proceedings that may be in process at the time. This allows the homeowner time to find a way to get caught up on any past due amounts to their lender. Ongoing mortgage payments must be made separately from the monthly payments to the trustee to avoid future collection activities from the bank.