What is Chapter 13 Bankruptcy?
Chapter 13 is often called the the life-line/reorganization chapter because it offers individuals an opportunity to save their homes from foreclosure.
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 will still make all mortgage payments that come due during the chapter 13 plan on time moving forward and perhaps may seek or qualify for a loan modification or interest rate reduction once you have filed your case and your attorney had reviewed mortgage information on file/filed.
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 a person 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”. If you wonder “what is Chapter 13 bankruptcy”, the most important thing to know is that you essentially will be given a monthly payment plan. You pay to a chapter 13 trustee, the trustee then pays your creditors accordingly each month until successful completion of your plan terms (length).