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Chapter 13 Bankruptcy


Chapter 13 bankruptcy is available in many cases for debtors that have regular income or are wage earners including their spouses if filing jointly. Chapter 13 bankruptcies can be complicated and often requires greater legal skill and knowledge that that required for chapter 7 bankruptcy. Many debtors file chapter 13 bankruptcy due to the fact that the debtor’s income or household income exceeds the amount permitted under chapter 7, the debtor’s assets cannot be fully protected under the exemptions laws under chapter 7 and would result in a loss of these assets, or the debtor seeks to cure arrearages on a promissory note secured by a mortgage or home equity line on a primary residence or investment property. Another main reason many debtors chose to file chapter 13 bankruptcy is due to the ability to strip off a second mortgage on a primary residence. This “lien strip” is not available to homeowners under chapter 7 and generally without the lenders consent debtors cannot cure arrearages and retain a primary residence in chapter 7. Debtors attempting to retain a home in chapter 7 must be current on the mortgage or obtain a modification from the lender which is often difficult. There are a number of other legal considerations used to determine if an individual can or should file chapter 13 bankruptcy and a formal legal consultation should be sought to assess both the relief afforded and the impact of filing.


A chapter 13 bankruptcy requires that a repayment plan be proposed to the court and confirmed. Once the plan is confirmed the creditors’ rights to repayment of the debt is determined by the plan and no creditor can take any action to collect a debt outside of bankruptcy court. In many cases the repayment plan actually involves the repayment of the debt at a fraction of what is owed over the course of the plan and the remaining balance is discharged upon the successful completion of the plan. The discharge is similar to the discharge obtained in chapter 7 but in certain circumstances includes debts that cannot be discharged in a chapter 7. In short, there are both advantages and disadvantages to filing chapter 13 as compared to chapter 7 and a formal legal consultation should be obtained in order to determine the possible debt relief afforded.

Many debtors view chapter 13 as undesirable due to the inclusion of a payment plan and the length of the bankruptcy, however, the relief that can be obtained especially with regard to real property can be advantageous. In addition, the unavailability and expense of other chapters of bankruptcy as well as the potential loss of property often dictate that chapter 13 is the best alternative.

Many of the same protections and a few additional provisions are just as applicable in chapter 13 as in chapter 7. A chapter 13 bankruptcy may be able to
  • Stop Foreclosure Proceedings and Lawsuits filed by Credit Card Companies
  • Eliminate Mortgage and Home Equity Line Debt
  • Cure Arrearages on Mortgage Loans
  • Stop Repossessions
  • Stop or Prevent Wage Garnishments
  • Eliminate Medical Debt
  • Eliminate Credit Card Debt and other Unsecured Debt
  • Protect Exempt Assets and Wages
  • Stop Creditor Calls and Harassment
Contact Tiller & Rivera Law P.A., PLLC., for a FREE CONSULTATION.
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