Chapter 13 bankruptcy is often referred to as a repayment plan of an individual’s consumer debt. A “plan” is created based on the individual’s income and expenses and evaluation of how much of a monthly plan payment  the individual can make. Then, based on the time period and the amount of the plan payment an assessment is made as to determine which debts will be fully paid, partially paid, and possibly not paid at all. The Chapter 13 payments are made to a bankruptcy trustee who then makes payments to the creditors based on priority.

The length of the bankruptcy can vary from 3 to 5 years depending on the person’s income and amount of debt.  Chapter 13 bankruptcy is less common with bankruptcy filers than a Chapter 7, as most people filing bankruptcy do not want to have it continued for over the course of 3 to 5 years. However, for those individuals that do not qualify for a Chapter 7 there can be advantages worth the time commitments.

Some of the benefits of a Chapter 13 bankruptcy include:

*  Structured payment.   A Chapter 13 bankruptcy provides a debtor with a structured payment making it easier to manage your budget and to know what amount of payment you must make each month towards your debt.

*  Protection from collection activity.  Under a Chapter 13 bankruptcy you will make your payments to a bankruptcy trustee and your creditors are prohibited from contacting about collections.  Thus, when on a structured plan you won’t have to deal with the constant phone calls and harassment.

*  Reduction in debt payments.  When creating a Chapter 13 plan,n some cases, outstanding debt that needs to be paid (such as a car loan) can be factored on a 60 month basis reducing the amount of the monthly payment owed to the creditor.  A common example is re-factoring a the payment of a car loan to a 60 month basis.

*  Unsecured debt is wiped out.   During your Chapter 13 bankruptcy an individual will make payments towards there debt.  However, at the end of the bankruptcy plan if there is any unsecured non-priority debt remaining it is discharged and wiped out.   In some cases, individuals are able to discharge their second mortgages.

As you can see, for the right individuals there are many advantages and benefits to filing a Chapter 13.