What is Chapter 13 Bankruptcy?

Chapter 13 is often called the life-line/reorganization chapter because it offers individuals an opportunity to save their homes from foreclosure. Among its many benefits, it allows you to:

Catch up on mortgage payments and avoid foreclosure

By filing under this chapter, individuals can stop foreclosure proceedings and catch up on delinquent mortgage payments!

You still make all mortgage payments on time that come due during the Chapter 13 plan moving forward and you may seek or qualify for a loan modification or interest rate reduction once you have filed your case and your attorney has reviewed mortgage information on file.

Reschedule secured debts

Another advantage is that Chapter 13 can allow individuals to reschedule secured debts (other than a mortgage for their primary residence). This way you can extend the amount over the life of the Chapter 13 plan. Doing this may lower the payments because Chapter 13 plans usually are 60 months, but may be as little as 36 months. This depends upon your last 6 months of income and expenses under the IRS guidelines for the number of your household.

Chapter 13 basically acts like a consolidation loan

Chapter 13 also has special provisions that protect third parties who are liable with the debtor on “consumer debts”, which may protect co-signers.

Chapter 13 basically acts like a consolidation loan, hence it’s usually referred to as a “reorganization” or debt “restructure”. The most important thing to know about Chapter 13 is that you essentially will be given a monthly payment plan, which you pay to a chapter 13 trustee, who then pays your creditors accordingly each month until successful completion of your plan terms (length).

What is chapter 13 Bankruptcy?