WHAT IS CHAPTER 13?
In Chapter 13, a consumer debtor proposes and completes a plan to repay his or her creditors over three to five years.
The plan in Chapter 13 is sometimes referred to as a “Wage Earner
Plan.” The plan will provide for regular monthly payments to a Chapter
13 Trustee who disburses the monthly payments and ensures the money is
mailed to each creditor.
The Chapter 13 Trustee will take debtor’s monthly payment and
disburse that money to the debtor’s creditors according to whether the
creditors are secured (auto loan), unsecured (credit card), or priority
(taxes) creditors. The court must approve of the Chapter 13 plan and
there are strict requirements for approval. When a debtor has
completed all payments called for by his or her Chapter 13 plan, then
the debtor obtains a Chapter 13 discharge. TOP 7 BENEFITS OF CHAPTER 13
Many
people do not understand how Chapter 13 can help them other than it is a
bankruptcy involving
a debt consolidation plan. But
Chapter 13 can help a debtor in various ways, more than is realized.
Here then is the list
of the top 7 benefits of Chapter 13:
1.
If you are behind in your mortgage payments prior to filing for Chapter
13, you may cure the mortgage
arrearage through the Chapter 13 plan over a period of three to five
years without your mortgage
being affected.
2. You may sell or refinance your home or business while participating in a Chapter 13 case.
3.
A Chapter 13 plan of repayment may provide for financing of a car for
the total amount of the vehicle's value.
In other words, a debtor wishing to
finance his car in a Chapter 13 plan may pay the value of the vehicle
(as opposed to the
loan amount which is probably much
more than the value of the car), unless the car loan is relatively new -
within 910 days
of filing of the Chapter 13.
4.
Unlike credit counseling services, a Chapter 13 plan may provide for
the payment
of creditors with or without
interest. In addition, the payment of creditors need not be for 100% of
the debt but may be for
a percentage of the debt based on
debtor's assets and expenses at the time of filing.
5. In
addition to automatically
stopping any collection activity of
creditors such as lawsuits, wage garnishments, home foreclosure, and
telephone calls,
the Chapter 13 bankruptcy
automatically stops any collection activity against co-debtors, who have
contracted the debt along
with the debtor. This is called the
co-debtor stay.
6. A Chapter 13 payment plan may provide for the
payment of
state and federal tax liabilities
over a period of three to five years, whether or not the taxes are
dischargeable.
7. A Chapter 13 case may be dismissed at any time by the debtor, who might quickly recover from any financial problems he
or she is having. |
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