Bankruptcy Chapter 13

A chapter 13 bankruptcy is sometimes referred to as a wage earner's bankruptcy. This type of bankruptcy allows individuals to develop a plan to repay part of their debts over a period of three to five years. Chapter 13 bankruptcies are typically filed by individuals who make too much money to file under chapter 7.

A chapter 13 can offer a number of significant advantages over chapter 7 liquidation. First and foremost, a chapter 13 bankruptcy can be used to save your home from foreclosure. By filing under chapter 13, you can immediately stop foreclosure proceedings and formulate a plan to pay your past due payments over an extended period of time. Depending upon your situation, you may also be able to eliminate a second or third mortgage against your home through a process called "lien stripping" that is available only under chapter 13. Another advantage of filing under chapter 13 is that it allows you to reschedule your debt payments and extend them over the life of the chapter 13 plan.

In essence, a chapter 13 bankruptcy acts like a consolidation loan under which you make payments to a bankruptcy trustee who then distributes the payments to your creditors. The amount you repay is based upon the amount of "disposable income" that is available to you each month. You do not need to repay all of your creditors in full in order for the court to approve your repayment plan.

Filing bankruptcy is a very important decision that will have long lasting consequences. You should consult with a qualified attorney before making your decision.

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