What is a Chapter 13

A Chapter 13 bankruptcy is a reorganization of all debts you might owe:  houses, cars, credit cards, medical bills, personal loans, and etc.   What is reorganing debt mean?  A person filing a Chapter 13 case can catch up on past due payments owed to mortgages and car payments without the worry of foreclosures or repossessions.  How is that done?  All the past due payments get added up and repayment of the arears are spread out over 60 months ie 5 years.  So, if you owed $6000.00 of past payments on a mortgage or car payment, you be paying $100.00 a month to catch up on the past due payments.  The relief of not needing to catch up on all past due payments all at once will allow a person to make current payments on the mortgage and car payments.  So, you will be able to be current on your mortgage and car payments and be able to catch up on the past due payments.

A Chapter 13 reorganization also means that a person will get relief from unsecured debt.  Part of the benefit of a Chapter 13 case is that you only need to pay a prorate portion of unsecured debt.  What does that mean?  Well, in simple terms, you only have to pay like 5% or 10% of what you owe.  The percentage depends on your case but if you are like most people you do not have a lot of money at the end of the day and whatever you have left after all you expense is what the unsecured creditors get.  So, if you got $10.00 left at the end of the month and your unsecured  debt is $20000.00.  Your creditors will is $600.00 made over the course of the plan--$10.00 a month.  Yes, you discharge the remaning $19,400.00 not paid.

A Chapter 13 reoganization of debt includes making payments on priority taxes owed to the IRS and State governments as part of your plan payments.  So, if you owed $6000.00 of pass due taxes, you make a payment of $100.00 a month to pay these taxes.  Again, you do not have to make a payment of $6000.00 all at once.

However, Chapter 13 cases do more than just reorganize past due secured payments and eliminate unsecured debt.  You can get rid of second mortgages, IRS liens and cramdown loans to the value of property.  All of these things can be completed in a Chapter 13 case.  The absolute best part of a Chapter 13 case is that you are protected by the automatic stay which means, no foreclosure sales, no garnishments, no levies of bank accounts, no interest, or late fees on past due debts.  All of these things are stopped to allow you to reorganize your debt.  The key is if you stay current on your mortgages, car payments and plan payments, you will get the benefits of catching up on past due payments, cure tax liability and discharge unsecured debt with just one payment a month.  In other words, you can get your life back to normal and in five years walk away with everyone you want to keep—house, car, bank accounts, wages free of garnishments.

And, like a Chapter 7 case, you get a credit report free and clear of all discharged debt.  You can  back on track for the rest of your life.