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. Read more about the Chapter 13 Plan…

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.   Read more about who may be a debtor in 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. Read more about Bankruptcy and Loan Modifications.

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. Read more about the treatment of car loans in the Chapter 13 Plan…

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.

About Author

Keith F. Carr is an attorney practicing Divorce, Estate Planning, and Bankruptcy. Attorney Keith F. Carr has over 30 years experience. Founder of Law Offices of Keith F. Carr, located in San Francisco, San Jose, and Palo Alto, Ca.

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