Chapter 13 is subtitled “Adjustment of Debts of an Individual with Regular Income”. Chapter 13 is often advised in connection with a person’s financial difficulties, especially when foreclosure of a home place is imminent. A Chapter 13 Bankruptcy allows a person who is behind on house payments to “catch up” the house payments which are in arrears, usually over a period of three to five years, while at the same time continuing to make the regular house payments.
However, it is important to analyze the situation correctly, because 70% of all Chapter 13 bankruptcies do not succeed. Reasons for this lack of success include: 1) too optimistic an assessment of Debtor’s financial situation; 2) failure to realize that over a period of three to five years lots of adverse things can happen (sickness, loss of job, marital problems, children’s problems, etc.).
In a Chapter 13 Debtor is protected from lawsuits, garnishments, and other creditor actions while the repayment plan is in effect. Chapter 13 also allows debtors to repay general creditors (credit cards, medical bills, etc.) a portion of the amount owed over the three to five year period.
Chapter 13 bankruptcies are complex. If you feel the need for advice in connection with such, be sure to seek counsel of a competent bankruptcy attorney.