Learning About Bankruptcy: Chapter 13

A Chapter 13 bankruptcy case may be used by an individual, who has regular income, to pay back debt over a period of time, with a payback period of up to five years, and is often used by debtors who seek to save their house or other real property fromforeclosure. An individual who has experienced some financial hardship and has fallen behind with their mortgage payments, car loan payments and such can make these “arrears” payments each month to their bankruptcy trustee in accordance with a Chapter 13 Plan that their attorney files with the bankruptcy court. 

A Chapter 13 can also be used purely as a Debt Consolidation tool. If you are unable to pay your debts because the minimum payments are unaffordable to you, a Chapter 13 case can alleviate the numerous payments that you are making to several creditors by combing them into one monthly plan payment. It allows the Debtor a repayment period, usually up to five years. A Chapter 13 bankruptcy can be viewed as personal reorganization because in a Chapter 13 proceeding, you deal with ALL of your debt obligations at once. You consolidate all of your payments into one Trustee payment which you make each and every month. It also makes all of the late fees, overlimit fees and interest rates STOP!

Creditors must abide with the requirements of bankruptcy law. In Chapter 13 bankruptcy, your repayment plan is not based upon each creditor’s monthly payment amount or what that creditor is willing to accept, it is based on what your individual circumstances allow you to afford within the budget set forth in your petition, pursuant to Bankruptcy law.