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Chapter 13 Bankruptcy

Chapter 13 is a payment plan. Depending on how much income you have available after expenses each month, your plan might pay 100%, 50%, 1%, or some other percentage of your debt. Whatever percentage it pays, if you complete your plan payments, the unpaid debt is discharged. Roughly speaking, a Chapter 13 is a lot like Chapter 7 in the sense that it discharges or eliminates most debts that you have. The difference is that with Chapter 13 you make payments and with a Chapter 7 you do not.

So why would anyone make payments to get the same result as a Chapter 7? The answer is that Chapter 13 is more flexible than Chapter 7, allowing you to do things that may not be possible in Chapter 7.

For example:
  • You may be able to file a Chapter 13 when it would not be possible to file a Chapter 7 due to means test considerations.
  • Chapter 13 can be used to catch up on missed house or car payments to prevent a foreclosure or repossession.
  • Chapter 13 may allow you to reduce the interest rate on your car payment or, in some cases, reduce the balance owed on your car.
  • Chapter 13 may allow you to strip off a second or third mortgage in some cases. This would mean that you would not be required to pay the second mortgage.
  • If you have nonexempt assets, Chapter 13 may be the best way to keep them.
  • Chapter 13 allows you to discharge certain debts that would not be dischargeable in Chapter 7, such as certain damaged property claims, marital property settlements, and certain fines or penalties.
  • You may prefer to make some payment on your debts because you think that is the right thing to do.

Chapter 13 can also be useful in cases where you are not able to get a discharge of debt. This might be true if you got behind on your house payments, for example, and needed a way to catch up, but did not otherwise need to eliminate debt.

Call us at (651) 639-0313 if you were unclear as to whether it would be better to file a Chapter 7 or a Chapter 13. We are happy to talk to you and will not charge you anything for the call. Remember, we are not here to judge you, only to help you. Don't be embarrassed about calling.

Chapter 13 Bankruptcy

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