When a consumer is considering bankruptcy, the usual way to file it is to use Chapter 7 bankruptcy but in some cases it makes more sense for the consumer to file under Chapter 13 bankruptcy law. All bankruptcies, regardless of which chapter is filed, are done under the jurisdiction and supervision of the federal bankruptcy court.

Someone who files under Chapter 13 bankruptcy protection is shielded and protected from creditors who might otherwise file a separate lawsuit against the consumer to collect the outstanding debt owed. When a consumer files Chapter 13 bankruptcy, the debt from all creditors is consolidated into one debt, it drastically reduces or even eliminates interest payments, and in almost all cases, it lowers the total amount of cash that the consumer needs to lay out each month.

Among the beautiful parts about this is that after you have notified the creditors that you have filed bankruptcy, Chapter 13 or any other chapter, they can't call you or send you threatening letters, which only serves to increase your stress level anyway. You are recommended to keep a notebook near your phone and note which creditors you told about your bankruptcy, noting date, time, creditor and the name of the person you talked with. If they persist in calling after being notified you have filed bankruptcy, they are in violation of federal law and you may have the option at that point of bringing a countersuit against them for that violation. Believe me, they are comfortable with that and do not want to risk it.

Now by looking at this explanation, if you were doing research into your bankruptcy options, you may have noticed that Chapter 13 bankruptcy sounds very similar to the process of using a debt consolidation service. You are right, but there are some very distinct advantages and disadvantages of each. For example, a debt consolidation service charges a small fee for their services, where the total amount of that fee would probably be a bit more than you would pay for your Chapter 13 bankruptcy filings and legal fees. However, with a debt consolidation service, your credit rating is maintained and the fact that you are using a debt consolidation service is frequently not even visible on your credit reports, whereas a bankruptcy filing is a huge neon sign on your credit reports for the following 7 to 10 years. Although everyone’s situation is different, it appears a debt consolidation service, even though costing a bit more, would have much fewer long term negatives. You should really compare both options with an above average bankruptcy lawyer so you can make an informed decision about what is best for your circumstances.

So the bottom line is that a chapter 13 bankruptcy gives the consumer the opportunity to pay off their financial obligations on time. The amount that the consumer will pay each month is determined by the bankruptcy court and you will be an amount determined by a close examination of the consumer’s sources of income. A trustee is appointed by the court and the consumer’s check each month is given to that trustee. Generally, this must be a certified check or cashier’s check, so it will be a little more hassle to get that kind of check each month and get it to the trustee.

If you're considering bankruptcy as a consumer, you may either file Chapter 7 or Chapter 13. But especially with the recent changes in the bankruptcy laws, filing bankruptcy is no longer a “do it yourself” process unless you are willing to get very familiar with the bankruptcy laws. Making a mistake in the complex procedures that have been established could easily end up costing you greater than a bankruptcy lawyer’s fees.