A Chapter 13 bankruptcy is a reorganization of an individual’s or of a husband and wife’s debts. Many Chapter 13 bankruptcies are filed by individuals who are behind on the their mortgage payments or car loans. This can help them modify their financial arrangements with their creditors regarding their mortgage and car loan payments. The bankruptcy filing stops all state court actions with regard to either repossession of their car or foreclosure on the individual’s home.
The Plan
In a Chapter 13 bankruptcy, the individual filing the bankruptcy must submit a plan. The purpose of the plan is to set out a schedule to repay creditors all the money they are owed or a portion of the money they are owed over a period of 3 years to 5 years. Most plans are funded by the income the debtors’ anticipate receiving during the 3 or 5 year period of the plan. When the plan is submitted it is reviewed by the bankruptcy Trustee. If the bankruptcy Trustee finds the plan is acceptable, it is usually confirmed by the bankruptcy court. Payments under the plan are made to the Chapter 13 Trustee who thereafter distributes the payments to the individuals who filed as the bankruptcies creditors.
The Discharge
In a Chapter 7 bankruptcy, individuals who file receive a discharge in a short period of time. However in a Chapter 13 bankruptcy, the individuals filing the bankruptcy are required to make all of the payments under the bankruptcy plan before they can receive a discharge. During this entire period, whether it be 3 years or 5 years, the individual in bankruptcy is protected from wage garnishments, foreclosures, repossessions and creditor based lawsuits.
Elliot S. Schlissel, Esq. has been practicing bankruptcy law for over 35 years. He is the managing partner of Schlissel DeCorpo LLP. The law firm represents debtors in foreclosure defense and helps debtors file bankruptcy cases and obtain mortgage modifications. They can be reached for a free consultation at 800-344-6431 or by e-mail at Elliot@sdnylaw.com.
