Chapter 13
Under current law, a chapter 13 bankruptcy (reorganization) allows the debtor to
reorganize and pay back debt over a three to five year period. The filing of a chapter 13 bankruptcy
eliminates the interest rate of unsecured debt and reorganizes late
mortgage payments, tax debt, back child support, late car payments, and miscellaneous
secured debt. Based on financial circumstances, some debtors
are only required to
repay a small percentage of their unsecured debt and reduce their secured loans
to the fair market value of the security at the time of filing.
The best benefit provided by the chapter 13 bankruptcy is that it combines all of
creditor payments into one affordable plan payment. As such, many compare chapter
13 to debt consolidation. However, unlike debt consolidation programs offered by
private companies, unsecured creditors must accept the terms of your reorganization
plan. The chapter 13, like all bankruptcies, also provides immediate relief from
creditor harassment, foreclosures, repossessions, wage garnishments, levies, lawsuits,
etc., which are not granted in a typical debt consolidation.
Once the chapter 13 plan is completed, in most cases, the
debtor will receive a discharge and can immediately begin rebuilding his or her credit.
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