Bankruptcy is a powerful legal tool that can help people get out of debt and stop collection action, like collection phone calls and wage garnishments. There are two types of bankruptcy that individuals and married couples most often file: Chapter 7 bankruptcy and Chapter 13 bankruptcy.
While both chapters offer many of the same benefits, Chapter 13 offers additional benefits to debtors that are not available under Chapter 7 bankruptcy.
The Powers of Chapter 13 Bankruptcy
Chapter 13 bankruptcy creates a three to five year repayment plan, allowing debtors to pay back all, or a portion, of their debt. Generally, the repayment plan will be three years when the debtor’s income falls below the state’s median, adjusted for household size; the repayment plan will be five years when the debtor’s income is above the state’s median, adjusted for household size.
- The Chapter 13 plan can be changed during the case. If income decreases or is temporarily interrupted, the plan can be amended to accommodate the changes. Of course, changes must be approved by the Bankruptcy Court.
- The automatic stay protects the debtor for the life of the plan, all three to five years. During that time there can be no foreclosures or repossessions (without court approval), and no garnishments, levies, or collection calls.
- Chapter 13 can be dismissed―the debtor can exit bankruptcy, unlike under Chapter 7.
- If tax debts are owed, the IRS must adhere to the repayment terms set forth in the Chapter 13 plan.
- Mortgage arrears from prior to filing can be paid back over the life of the plan, for up to five years.
- Car payments can be paid back over the life of the plan, through the plan.
- Mortgage liens that are completely underwater can be “lien stripped” (removed, eliminated) in Chapter 13.
- A Chapter 13 repayment plan is enforced by a federal bankruptcy judge (unlike debt settlement arrangements) and once the plan is approved by the court, all creditors must adhere to the terms of the plan.
- At the conclusions of a Chapter 13 bankruptcy, any remaining dischargeable debt is erased forever.
Chapter 13 bankruptcy is a powerful legal tool that offers many benefits.
It is our mission to ensure that you understand the powers of Chapter 13 bankruptcy and how filing can benefit you specifically. We offer free consultations to anyone in or around Savannah, GA looking to explore how to get out of debt.
Call us today at (912) 351-9000 or contact us to schedule a free consultation.
Find out more about Bankruptcy in our guide: All About Bankruptcy
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.