CH. 13 BANKRUPTCY
WHAT IS CHAPTER 13 BANKRUPTCY?
Typically, referred to as a wage earner's plan, Chapter 13 bankruptcy helps those who don't qualify for Chapter 7 bankruptcy reorganize their debt. Payments are made over the course of several years, and any remaining outstanding balances may be forgiven. While you still have to make payments to creditors, you often get to keep your house, car or other assets while payments are being made.
THE BENEFITS OF CHAPTER 13 BANKRUPTCY
There are two primary benefits of choosing Chapter 13 bankruptcy. First, if you have a second or third mortgage on your home, those liens may be stripped away. This means that the lienholder no longer has an interest in the property, and you are no longer required to pay those creditors after the bankruptcy is over. You may be entitled to strip liens from your home as long as the value of your home is less than what you owe on your first mortgage.
Another benefit is that you get an opportunity to cure defaults on mortgages or car payments, and you can take care of past due non-dischargeable taxes on a five-year schedule as opposed to what the IRS demands. Child and spousal support arrearages can be paid over that same period, though current payments must also be made, and non-support obligations to spouses can be paid under the plan and discharged at the end.
WHAT TO REMEMBER WHEN FILING FOR CHAPTER 13 BANKRUPTCY
It is important to remember that Chapter 13 bankruptcy will not eliminate all of your debts. If you have student loan debt, owe back taxes or back child support, that debt will still need to be repaid. You should also be aware that you may not be able to obtain new credit without the court's permission until your prior debts are discharged.