HOW DOES CHAPTER 13 BANKRUPTCY WORK?

Chapter 13 bankruptcy enables individuals with regular income to develop and submit a written repayment plan to the court to repay what you can afford to your creditors, including your mortgage, car loans, and other debts. This plan lasts a minimum of 3 years, but can last as long as 5 years. In most cases, you make one payment each month to your chapter 13 trustee, who then disburses these funds to your creditors. Once your plan is completed, you receive a discharge of all debts not repaid under the plan, and except for certain debts which cannot be discharged like taxes, child support, or alimony, and your creditors can no longer chase you for the debt you no longer owe.

WHY FILE CHAPTER 13?

People usually choose to file Chapter 13 for the following reasons:

• To save your home from foreclosure or catch up past due house payments.
• To stop your car from being repossessed. You can stop most wage garnishments or bank levies.
• To stop phone calls from debt collectors or creditors.
• To stop IRS collection activities, while you repay outstanding taxes over time. To eliminate debt you cannot afford to pay, including medical debt, credit card debt, or other loan debt.

WHAT ARE THE ADVANTAGES TO FILING CHAPTER 13?

There are many reasons that Chapter 13 case may be preferable to a Chapter 7 case.  While a Chapter 13 case requires a three to five year plan, a Chapter 13 case may be preferable for the following reasons:

• You can keep your home or car, even if it has equity, instead of having it liquidated by a chapter 7 trustee.
• You can catch up on past due payments on your home or car, instead of giving up those assets.
• You can modify the terms of certain car loans and other secured debts, other than your home loan, and reduce your monthly payments to manageable amounts.
• You can pay less than the full amount owed on unsecured debt, without any interest or fees, and in some cases, you may pay little or none of your unsecured debt.
• In most cases, you make one consolidated monthly payment to your chapter 13 trustee, rather than having to deal with numerous creditors.
• Chapter 13 stays on your credit report for a shorter period of time than a Chapter 7 case.

Contact our board certified consumer bankruptcy attorneys

Don’t let crushing debt drive you out of your home or car. Chapter 13 bankruptcy can give you the opportunity to start over, free from your debt. Call Stubbs & Perdue at 1-800-348-9404 or contact us online to schedule your bankruptcy consultation at our New Bern or Raleigh offices.