Chapter 13

Chapter13 bankruptcy is much different than chapter 7 bankruptcy. While in chapter 7 bankruptcy you make no payments to the your bankruptcy trustee or the bankruptcy court, in a chapter 13 bankruptcy you have a 36 to 60 month repayment plan and you make monthly payments on your debts. People may ask why would I file a chapter 13 bankruptcy and make monthly payments and be in bankruptcy for 36 to 60 months? The answer is twofold. It could be the case that you’re not eligible to file a chapter 7 bankruptcy, and if you need relief from your debts chapter 13 may be your only alternative. The other. The reason the people choose chapter 13 bankruptcy over chapter 7 is that you can do many things in a chapter 13 bankruptcy that you cannot do in a chapter 7 bankruptcy. If you are behind in your mortgage or car loans you can get 3 to 5 years to make up those back payments. While your 3 to 5 year payment plan is going on any repossession of your vehicle or foreclosure in your home is put on hold and cannot proceed. This is called curing a default and it cannot be done in a chapter 7 bankruptcy. Some families have two, three, or four vehicle loans, a chapter 13 bankruptcy frequently allows you to reduce the balance in the car loan down to the fair market value of the vehicle and to reduce the interest rate on the loan which results in lower motor vehicle payments. Imagine if your car payments were half of what they are now. Chapter 13 bankruptcy can help you if you have back income taxes or real estate taxes. During a chapter 13 bankruptcy you get 3 to 5 years to repay back real estate and income taxes, and there are no penalties or interest. If the income taxes are more than three years old and you have filed your returns then those income taxes simply go away, and do not have to be repaid. However income taxes for the most recent three recent years must be repaid. When real estate or income taxes have to be repaid the biggest problem is the continual interest and penalties added onto the taxes. With a chapter 13 bankruptcy there are no more interest and penalties and you pay on the taxes that exist at the time the bankruptcy is filed. A chapter 13 bankruptcy will stop a sheriff sale or tax sale of your property. Unsecured debts like credit cards, personal loans and medical bills can still be greatly reduced and sometimes eliminated in full. These are some of the reasons that people choose a chapter 13 bankruptcy rather than a chapter 7 bankruptcy.