Chapter 13 bankruptcy is designed for individual consumer debtors that need time to cure arrears on a loan or that do not qualify for Chapter 7 due to the income restrictions. In a Chapter 13, debtors create a debt repayment plan, based upon their income and expenses, which will resolve their debts over a period of three to five years. Chapter 13 Plans are reviewed by the Chapter 13 Trustee and submitted to the Bankruptcy Court for review and approval. In most Chapter 13 Plans, you pay your disposable income on a monthly basis to a Trustee. The Trustee will then make disbursements to your creditors.
Chapter 13 gives you an opportunity to attempt to prevent the foreclosure of your home and catch up on late payments. Bankruptcy law provides for an "automatic stay," which stops virtually all debt collection against you and is intended to prevent creditors from continuing to harass you. The automatic stay will stop a foreclosure immediately upon the filing of your case. Additionally, Chapter 13 gives you up to five years to payoff the arrears.
Individuals generally file a bankruptcy case to "discharge" their debts. After all of the required payments have been made under the approved Plan, debtors are eligible to seek a discharge of almost all remaining amounts owed to their pre-bankruptcy creditors. Only a few debts are not dischargeable in bankruptcy such as student loans and certain taxes. With respect to secured debts (e.g., mortgages, car loans), if they wishes to keep the property, then the debtor is required to continue to make the loan payments pursuant to the contract.
While bankruptcy is generally complicated, Chapter 13 has very specific limitations as to how much debt is allowed before being qualified and rules as to how much you will be required to repay. If you would like to determine your eligibility for this bankruptcy solution, call the trusted law firm of Hendel, Collins & O'Connor today at (413) 734-6411.