Chapter 13 bankruptcy, also referred to as "reorganization", consolidates debt and reorganizes it into an affordable monthly payment plan approved by the court. In comparison to Chapter 7 bankruptcy, Chapter 13 does not completely eliminate a debtor's unsecured debt and requires a debtor to repay a portion of or all of the debt. However, the debtor is able to pay off their debt in affordable monthly payments over a period of three to five years, as determined by the court depending on monthly income, expenses, and assets. This enables a debtor to pay off their debt on their own terms, at a rate that they can reasonably afford.

While in an interest-free Chapter 13 debt repayment plan, creditors cannot collect from you, and they are required by a Federal Court order to adhere to the terms of the plan.

One very important thing to remember about Chapter 13 bankruptcy is that you must be working or have a consistent source of income for your repayment plan to be approved by the court.  Not only must you be able to pay for your monthly living expenses, but you must also be able to make a payment to the court to consolidate your debts.

Debts that are generally consolidated in a Chapter 13 bankruptcy are mortgage arrears, balances on vehicle loans, student loans, credit card debts and other unsecured debts.  All outstanding debts must be included in the Chapter 13 bankruptcy consolidation.  If your home is presently in foreclosure, a Chapter 13 bankruptcy filing will stop the foreclosure any time prior to the sale, and allow you to repay your mortgage arrears through your Chapter 13 bankruptcy. You will still be obligated to make all future mortgage payments directly to the mortgage company, but they may not foreclose to collect any outstanding mortgage payments.

A Chapter 13 bankruptcy will also stop the finance company from repossessing your car.  The past due payments and the entire balance on your vehicle loan will be consolidated, which you will pay off over the next three to five years.

Although you may not eliminate student loans in a Chapter 7 bankruptcy, you can consolidate them, with your other bills, in a Chapter 13 bankruptcy, and stop collection actions against you. 

In order to determine if a Chapter 13 bankruptcy is the appropriate option for you, and if you qualify for this reorganization plan, please contact the Stone Haven Law Group today.