In recent years, some bankruptcy courts have allowed Chapter 13 to be used as a platform to expedite a mortgage modification application.
The debtor's financial characteristics and the type of relief sought play a tremendous role in the choice of chapters.
During this period, his or her creditors cannot attempt to collect on the individual's previously incurred debt except through the bankruptcy court.
The disadvantage of filing for personal bankruptcy is that, under the Fair Credit Reporting Act, a record of this stays on the individual's credit report for up to 7 years (up to 10 years for Chapter 7);[5] still, it is possible to obtain new debt or credit (cards, auto, or consumer loans) after only 12–24 months, and a new FHA mortgage loan just 25 months after discharge, and Fannie Mae and Freddie Mac loans after 36 months.
However, during the pendency of a Chapter 13 case, the debtor is not permitted to obtain additional credit without the permission of the bankruptcy court.
The advantages of Chapter 13 over Chapter 7 include the ability to stop foreclosures although a foreclosure would be reinstated upon completion of the bankruptcy; achieve a "super discharge" of debts not dischargeable under Chapter 7;[6] "value collateral"; bifurcate the security interest of creditors in certain property that creditors are either charging too much interest for, or are over-secured, or both, and leading to a "cram down" modification of the debt; and prevent collection activities against non-filing co-signers ("co-debtors") during the life of the case.
The plan details the treatment of debts, liens, and the secured status of assets and liabilities owned or owed by the debtor in regard to his bankruptcy petition.