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Chapter 13
Chapter 13
is a “reorganization” bankruptcy which allows
debtors to repay some or all debts under a court
supervised repayment plan. As in Chapter 7, creditors are
not permitted to engage in collection activities after the
case is filed without obtaining court permission.
Chapter 13 can be
used to:
-
prevent
foreclosures
- prevent
auto repossessions
- repay
delinquent auto, mortgage and other secured
debts
-
halt IRS
garnishments or levies
- repay
child support arrearages
- protect
property that would have to be surrendered
in Chapter 7
-
obtain a
bankruptcy discharge for those persons not
eligible to file Chapter 7
A Chapter 13 repayment
plan can be set up to allow you to repay debts by making a monthly payment
over a period of time as long as five years and can allow you to retain
property that would otherwise be lost to foreclosure, repossession, or
garnishment.
Contrary to popular
perception, it is not always necessary to repay 100% of your debts in
Chapter 13. Credit card debts and other unsecured debts are paid if
and only if funds remain after the debtor has repaid delinquent
mortgage payments, auto debts, tax debts, and other secured or priority
debts. Thus, the vast majority of debtors filing Chapter 13 still
discharge a large portion of their unsecured debts.
Since most Chapter 13
debtors are not required to repay 100% of their debts, the monthly payment
under a Chapter 13 plan can be established at a level that fits within a
reasonable household or business budget.
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