The reorganization bankruptcy for individuals, Chapter 13 has several advantages over Chapter 7 when seeking to stop the repossession of a vehicle or foreclosure of a mortgage. Chapter 13 also offers relief from creditors for those individuals not eligible for a Chapter 7 discharge due to reasons such as a recent prior filing or too much income to qualify. Chapter 13 can also protect non-exempt assets that would otherwise be subject to liquidation under Chapter 7.
A plan of reorganization is proposed that typically lasts between three to five years. A regular payment is made to a trustee who then distributes the money according to a court-confirmed plan. Common treatment of creditors includes modifying an automobile loan to stretch the payments over the life of the plan while lowering the interest rate and possibly the loan balance to the actual value of the vehicle; curing mortgage arrears over time while maintaining regular, post-filing monthly mortgage payments; and possibly only paying pennies on the dollar to unsecured creditors such as medical bills, credit cards, and payday loans all while protecting you from collection lawsuits and wage garnishments.
Other advantages in filing under Chapter 13 include protecting cosigners; preserving your right to a Chapter 7 discharge in the event of a financial catastrophe in the near future; and paying priority or nondischargeable debts such as taxes, domestic support obligations, and student loans on more manageable terms than might be possible outside of bankruptcy.
Bankruptcy law is complex and hiring a caring, attentive attorney who focuses his practice on representing debtors in bankruptcy can make the process feel less intimidating and proceed smoothly with a greater chance of success. I pride myself on providing a thorough, free initial consultation to come up with a plan of action, discuss how to protect your property and wages, anticipate likely outcomes, and generally put your concerns about debt and bankruptcy at ease.