Why File Chapter 13

Chapter 13 is a repayment plan, or reorganization plan, for individuals. The repayment may be pennies or it may be 100%, depending on the consumer’s income and the value of their assets. The debtor proposes the terms of the plan which must last between 3 and 5 years. The automatic stay prevents creditors from taking any collection action during the case.

Chapter 13 can be used to cure defaults on home mortgages or to reduce the interest rate on high cost car loans. It can operate as a no interest, no penalties, tax repayment plan.

In Chapter 13, the debtor makes a monthly payment to the Chapter 13 trustee, who in turn, distributes money to the debtor’s creditors according to the terms of the Chapter 13 plan. Throughout the case, the debtor keeps his property.

At the end of the payment plan, the debtor gets a discharge of all of his dischargeable debts. It can be a powerful and affordable tool for getting back on your financial feet.