Chapter 13 Bankruptcy

Chapter 13 is for debtors with regular income. In a Chapter 13, you will propose a plan to repay your creditors in installments over a three to five year time-frame.  Usually, you are only required to pay a small portion of your debts.  Furthermore, your attorney's fees are included in the payment to the trustee, so all you have to worry about is making your monthly payments.

Chapter 13 offers you a number of advantages over liquidation under chapter 7. Perhaps most significantly, chapter 13 offers you the opportunity to save your home from foreclosure or car from repossession. By filing a chapter 13 bankruptcy, you can stop foreclosure proceedings and may cure delinquent mortgage payments over time.

Another advantage of chapter 13 is that it allows you the ability to restructure secured debts (other than a mortgage for your primary residence) and extend them over the life of the chapter 13 plan. Doing this may lower the payments. Chapter 13 also has a special provision that protects third parties who are liable with the debtor on "consumer debts." This provision, called the co-debtor stay may protect people who co-signed debts with you.

Finally, chapter 13 acts like a consolidation loan under which you make the plan payments to a chapter 13 trustee who then distributes payments to your creditors. You will have no direct contact with you creditors while under chapter 13 protection. Once your plan payments are completed, you will receive a discharge, and your creditors will be forever barred from collecting the discharged debts.