Chapter 13 bankruptcy allows debtors to protect secured property using the automatic stay and discharge personal liability for debt. The automatic stay goes into effect at the time the bankruptcy petition is filed. The stay prevents all debt collection against the debtor for debts incurred prior to the date the case was filed.
Debtors who file this type of bankruptcy submit a plan to reorganize their debts with the court. This plan addresses all of the filer’s debts. One of the purposes of the plan is to allow the debtor a way to cure missed payments to creditors holding a security interest in the debtor’s property. For example, if a debtor is behind on his mortgage payments at the time the case is filed, filing bankruptcy will stop foreclosure of the home and the plan will give him a way to get caught up on his payments to the creditor.
The key thing to remember about bankruptcy is that it addresses debts owed by the filer. If the debtor has no debt then they have no reason to file bankruptcy. Sometimes I meet with people who are interested in filing bankruptcy but have no debt. They are struggling with paying their rent, utilities, car payment, food expense, etc. Bankruptcy is a powerful tool for resolving problems with debt but it will not help a debtor with no debt who simply does not have enough income to make ends meet. There is not much that I can do for people in this situation but I do spend a few minutes brainstorming with them about how they can reduce their budget and increase their income. I don’t charge for initial consultations but time is valuable so I try to make their trip to my office worth the effort.