Chapter 13

Chapter 13 bankruptcy is a "reorganization of debts."  Many debtors considering bankruptcy choose Chapter 13 in order to catch up on past due payments, such as home and auto loans, and other secured debts.  Individuals that may not qualify for Chapter 7 may qualify under Chapter 13.

Chapter 13 bankruptcy involves a 3 to 5 year repayment plan overseen by the bankruptcy court.  The debtor makes monthly payments to the court, which allows the debtor to keep all assets in the debtors possession. 

Homes, Vehicles, & Other Assets

The most significant benefit to Chapter 13 is that the debtors are offered an opportunity to save their homes and vehicles from foreclosure.  When Chapter 13 is filed, foreclosure is stopped.  Delinquent mortgage payments may be cured over time, but the debtor must continue to make mortgage payments that come due.  Another benefit is that secured debts may be rescheduled and extended over the life of the Chapter 13 plan.  This may potentially lower payments, allowing the debtor some relief.  It acts as a consolidation plan.  The bankruptcy court, through the Trustee, distributes payments to the creditors.  The debtor does not have to have any direct contact with creditors.


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