Laws on Debt Forgiveness Through Chapter 13

By Heather Frances J.D.

When debt piles up, individual debtors may need the structure of a bankruptcy case to get back on their feet again. If you qualify, bankruptcy offers protection from collection efforts and a chance to partially erase some debts while paying others. An online legal services provider can help you file your bankruptcy case.

Chapter 13 Overview

Chapter 13 is designed for individuals with a regular income high enough to allow the filer to make small payments toward his debt under a repayment plan. Chapter 13 is governed by the federal bankruptcy code, so all Chapter 13 cases discharge the same types of debt, regardless of where the filer lives.

Automatic Stay

When an individual files a Chapter 13 case, he receives an automatic stay, which means his creditors must immediately stop collection efforts on past due debts. Chapter 13 is often the preferred type of bankruptcy for debtors who wish to keep their homes, since a mortgage lender must stop collection efforts when the Chapter 13 case is filed.

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Repayment Plan

The Chapter 13 repayment plan enables the debtor to make installment payments to his creditors over the life of the plan, which is three or five years, depending on the debtor’s income. The plan is proposed by the debtor but must be approved by the court. The debtor pays a portion of his monthly income to a bankruptcy trustee who, in turn, uses that money to pay the creditors.

Secured and Unsecured Debts

In a bankruptcy case, secured debts have priority over unsecured debts. Secured debts are those that are secured by collateral, such as a mortgage or car loan. Unsecured debts, such as credit cards and medical bills, may be discharged in a bankruptcy case, but secured debts are not. However, the bankruptcy case does allow the debtor to catch up on past due payments on secured debts so the creditor will not repossess the collateral. For example, if you are past due on your car loan payments, your lender can repossess your vehicle, but if you file Chapter 13 bankruptcy, he has to give you a chance to catch up on those past payments instead.

Discharge of Debts

At the end of the repayment plan, secured debts are usually paid in full but unsecured debts may only be partially paid. The remaining amount the debtor owes on these unsecured debts may be discharged by the bankruptcy court, which means the debtor is released from paying the debt. The creditor cannot attempt collection efforts on the discharged debt. However, this discharge will not apply to certain types of unsecured debt, such as child support or government-backed student loans.

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Bankruptcy Laws Regarding Mortgage


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Does Chapter 13 Reduce Debt?

If your debts are out of control, you have the option to declare bankruptcy. In a Chapter 13 bankruptcy, a court-appointed trustee draws up a repayment plan. The debtor agrees to turn over excess disposable income to the trustee for payments to the creditors. If the debtor meets the terms of the repayment plan, a Chapter 13 bankruptcy will not only reduce but eliminate all dischargeable debts.

Provisions of Chapter 13 of the Federal Bankruptcy Laws

Chapter 13 bankruptcy is a form of personal bankruptcy that allows an individual’s debt to be adjusted if he has a regular income. Unlike Chapter 7 bankruptcy, a Chapter 13 proceeding allows the debtor to keep property and pay debts over time rather than liquidating assets to pay creditors. One advantage of Chapter 13 bankruptcy is the opportunity for the debtor to save his home from foreclosure and even stop a foreclosure already in progress.

Who Is Declined for Bankruptcy?

A successful bankruptcy case discharges a debtor’s remaining debts after certain legal requirements are met. However, not every debtor qualifies for bankruptcy protection, and each type of bankruptcy has specific requirements. Even when a debtor qualifies for bankruptcy, his case can be dismissed if he doesn’t comply with the court’s requirements or if he covers up facts about his case.


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