Five Ways Debtors Benefit From Chapter 13 Bankruptcy

Oftentimes when debtors consider bankruptcy they think of Chapter 7 bankruptcy, where the debtor can completely discharge most or in some cases all of their unsecured debts.  But there are many debtors who are better off filing Chapter 13 bankruptcy and making repayments on their debts over the course of 3 to 5 years.

Below are a few ways that Chapter 13 could benefit debtors:

  1. Debtors in Chapter 13 bankruptcy are able to pay on all their debts with one easy payment made to the bankruptcy trustee.  These payments will be used to repay creditors in their order of priority as determined by the bankruptcy code.  This can be a huge stress reliever for any debtor overwhelmed by the sheer amount of debts they are paying..
  2. Debtors in Chapter 13 bankruptcy can keep their home even if they have a severe delinquency on their mortgage payments.  For example, a debtor 6 months behind on their mortgage could repay that delinquency over the course of 3 to 5 years while remaining in their home.
  3. As is the case for a mortgage, a debtor can keep their vehicle in Chapter 13 bankruptcy even if they are behind on their payments.  They will be allowed to pay up the delinquent payments over the course of their Chapter 13 bankruptcy repayment plan.
  4. Debtors who have underwater properties may be able to discharge their 2nd mortgage in Chapter 13 bankruptcy if the value of the property is not enough to secure the amount of the 2nd mortgage.
  5. As with real estate property, a debtor may be allowed to pay only the value of a vehicle if the vehicle is worth less that the amount of the car loan.