A chapter 13 bankruptcy is a reorganization for person. A chapter 13 debtor proposes a chapter 13 plan that reorganizes his or her debts. The plan tells creditors what obligations will be restructured by the bankruptcy, what creditors will be paid through the bankruptcy, and what creditors will receive their collateral back in place of payment.
During the life of the plan, the debtor is protected from creditors and is given the opportunity to get his or her life back on track. The protection of the automatic stay that goes into effect on the date of filing and the relief most debtors get from not having to pay back all the money that they owe allow debtors to regain control of their finances.
The chapter 13 payment plan proposed by the debtor begins with the first payment being due 30 days from the date the bankruptcy is filed. So, if the bankruptcy case is filed on April 4th, then a payment will be due May 4th with an additional payment due each month on the 4th until the number of months provided for in the plan are completed.
A chapter 13 bankruptcy is a good option if the client has one of the below issues:
- a year behind on payments to a home equity loan or first mortgage
- behind on Homeowner's Association
- car payments with a large interest rate or behind on car payments
- loan modifications outside of bankruptcy have failed time after time
- investment property that does not make any income or is upside down
- IRS debt