Chapter 13 Bankruptcy
This is the chapter in bankruptcy that you would file if you have a significant disposable income that could be used to fund a plan to pay back creditors over time. The term might be a 3 or 5 year term depending on whether you would pass the means test if you filing a Chapter 7. Some payments you would make directly like your first mortgage payment on your house whereas most, if not all, others will be paid by the trustee with your plan payment.
What are Some Benefits of a Chapter 13 over a Chapter 7?
- You may be able to avoid the accrual of interest and penalties on priority claims such as income tax debt.
- You may be able to cure the default on some debts you wish to keep in order to keep the asset without having to pay interest on the arrearage. (This would require that you have sufficient disposable income to pay your regular payment plus an arrearage payment.)
- A Co-debtor can benefit from the stay that would be placed on collection on the debt.
- In some instances a secured debt may be stripped down to the value of the collateral.
- Some property division obligations that would otherwise be non-dischargeable under a chapter 7 could be discharged under chapter 13.*
- *This list is not exhaustive