Chapter 13 is an effective form of bankruptcy offered by Title 11, also known as the Bankruptcy Code. A Chapter 13 bankruptcy case is a viable solution for anyone who is behind on their mortgage or car payment. However, making a chapter 13 plan work requires that Chapter 13 bankruptcy debtors have regular income to make payments consistently over the term of the Chapter 13 bankruptcy case.
A chapter 13 bankruptcy is sometimes referred to as a wage earner’s plan since it enables individuals with regular income to propose a repayment plan to repay all or part of their debts. Under chapter 13, debtors propose a repayment plan to make installments to creditors over three to five years. Thus, to make a Chapter 13 bankruptcy case succeed, debtors must be able to make payments regularly for three to five years.
The following are advantages to filing a Chapter 13 bankruptcy case:
*Chapter 13 offers individuals a chance to save their homes from foreclosure. Filing under this chapter stops foreclosure proceedings and allows the debtor to cure delinquent mortgage payments over time, provided that they make all mortgage payments that come due during the chapter 13 plan on time. This is a crucial element of making a Chapter 13 casework when the case is filed to stop foreclosure.
*Chapter 13 allows individuals to reschedule secured debts other than a mortgage for their primary residence and extend them over the life of the chapter 13 plan, thus potentially lowering payments.
*Chapter 13 also has a special provision that protects third parties who are liable with the debtor on “consumer debts.” – co-signers.
*Chapter 13 functions much like a consolidation loan where a debtor makes payments to a chapter 13 trustee for distribution to creditors.
Another key to making a Chapter 13 work is proposing and submitting a repayment plan that the bankruptcy court will confirm. The plan must provide for payments of fixed amounts to the trustee regularly. Making these payments in a timely fashion for three to five years is necessary for the case’s ultimate success.
Within 30 days after filing the bankruptcy case, even if the plan has not yet been approved by the court, the debtor must start making plan payments to the trustee. If the court declines to confirm the plan, the debtor may file a modified plan or the debtor may convert the case to a Chapter 7 bankruptcy case. If a debtor experiences any change in circumstances may that affect his or her ability to make plan payments, the plan may be modified either before or after confirmation.
Theron Morrison and the Morrison Law Group help their clients through every important stage of their bankruptcy case, especially when children are involved. Call 801.456.9933 today to schedule a FREE consultation. We have locations in Ogden, Logan, Sandy, Orem, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.
