What Chapter 13 Can Do For You:

Chapter 13 protects you from creditors while you prepare a plan to modify your debts. Chapter 13 can be used by a husband and wife jointly. You can stop foreclosure and take from three to five years to catch up on past-due mortgage payments. For Example, suppose you are behind four payments of $500 each on your mortgage, for a total of $2,000. You can include the $2,000 in your plan and pay it over a period of one, two, three or perhaps five years. (Of course, you must continue making the regular $500 monthly payments on the mortgage as they come due while you are "curing" the default under the plan.

Car repossessions can be avoided. If you are behind on installment payments on your motor vehicle--or on any other installment purchase contract other than real estate--the entire debt can be readjusted under the Chapter 13 plan. Stops Garnishments; stops repossessions; stops creditors' phone calls. Upon filing of a Chapter 13 case in the United States Bankruptcy Court, an automatic "stay order" takes effect, and stops all creditors' activities including foreclosure, repossession, seizure of any assets, garnishments, and creditor contacts such as phone calls and demand letters. Income Taxes and other taxes that are past due can be spread over a three to five year plan.

All Debts: In short, you can take all your debts, including taxes, mortgage arrearages, medical bills, loans, child support, charge accounts, bank card charges, even debts that may have been incurred through misrepresentation, and even government-insured student loans, and make one payment each month to a court appointed trustee who pays all creditors according to your "plan." Generally, you can pay as little as necessary to make the debt manageable.

Co-Signer Protection: Chapters 12 and 13 offer protection to your co-signer on non-business kinds of debt ("consumer" debt). The law enables you to pay your co-signed debts in full, even though you might not pay the full amount to your other creditors. Chapter 13 is used primarily by individuals who are not in business, but it can also be used by any business, large or small, as long as it is a sole proprietorship. (It cannot be used by a corporation). There is no requirement of insolvency, even a healthy business may avail itself of the protection of Chapter 13. Protection: Certain legal powers are conferred upon the Bankruptcy Court to protect you from interference. There is in effect a restraining order against all of your creditors, including taxing authorities, to keep them from seizing property or suing you for payment.

In addition, recent changes in the law now prevent employers from discriminating against you because you have filed for bankruptcy protection.