Chapter 13 Bankruptcy

What is a Chapter 13 Bankruptcy?

Chapter 13 bankruptcies are also called reorganizations. A Chapter 13 bankruptcy allows the debtor to keep most assets and arranges for partial or full payment of the debts owed over three to five years. Creditors must be paid at least as much as they would have received in a Chapter 7 bankruptcy situation. The debtor must pay all disposable (not necessary for living essentials) income into the plan. Money is paid to the trustee who then pays the creditors.

What are the benefits of a Chapter 13 Bankruptcy?

The major benefit of a Chapter 13 bankruptcy plan is that it allows the debtor to keep assets that would have to be liquidated in a Chapter 7 bankruptcy plan. Before filing a chapter 13 bankruptcy, compare the information on Chapter 7 bankruptcy and chapter 13 bankruptcy, check out the Chapter 7 Bankruptcy vs Chapter 13 Bankruptcy section. In many cases, filing for Chapter 13 bankruptcy is more beneficial than Chapter 7, as suggested by the article 'Chapter 7 and chapter 13 bankruptcy, which is best for me?'.

Other benefits of Chapter 13 bankruptcy plans are that they do include taxes into the bankruptcy plan and that the plan is like a consolidation loan. However, no interest is charged. Interest on your debts stops accumulating on the day you file for Chapter 13 bankruptcy. The amount you owe does not continue to grow through accumulating interest.

How long does a Chapter 13 Bankruptcy stay on the credit report?

A Chapter 13 bankruptcy will stay on your credit report for ten years.

What to do if I have problems making payments such as mortgage payments?

If you are having problems making mortgage payments or some other types of payments, you would be better off to work with your creditor independently and find a way to catch up on those payments, so that the late or missed payments only affect your credit report for seven years.

Creditors are more afraid of bankruptcies on a credit report than they are of late payments. Creditors usually do not receive full payment in a bankruptcy, but if the debtor merely falls behind, a profit can still be made.

In general you are better off trying to make your own settlements or payment plans with your creditors than going into a Chapter 13 bankruptcy. Keep filing a bankruptcy (chapter 7 bankruptcy or chapter 13 bankruptcy) as a last resort.

How to withdraw bankruptcy filing or stop bankruptcy filing?

If you have already filed for bankruptcy, you may be able to withdraw your bankruptcy petition, depending on where your case is at. You will need to consult with your attorney about this.