chapter 13 benefits:
- Avoiding home foreclosure by placing all mortgage arrears in the repayment plan to be paid over a three to five year period.
- Repaying outstanding tax liabilities through the bankruptcy plan rather than negotiating those with the taxing authorities directly.
- Reducing monthly car payments for vehicles purchased at least 2 1/2 years prior to the bankruptcy.
- Discharging the second mortgage on your personal residence whenever the property is worth less than the amount owed on the first mortgage.
- Deferring student loan payments over the life of the plan. Student loans will share with unsecured creditors listed in the bankruptcy.
Debt repayment in chapter 13 may be an alternative to chapter 7 bankruptcy whenever the debtor's current monthly income exceeds the state median income for the respective size of household or the debtor wishes to repay certain debts over a longer period of time (mortgage arrears and tax liabilities). Generally, the life of the chapter 13 plan is three to five years. The chapter 13 plan payment must equal the debtor’s ‘monthly disposable income’ — the portion of the monthly income not required to meet the ‘necessary needs’ of the debtor and his/her dependents.
In cases of impending foreclosures, homeowners are allowed to include their mortgage arrears in the Chapter 13 plan. If the value of the home is below that of the first mortgage on the property, the debtor may be able to discharge a second mortgage or any other junior lien(s) against the home.
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chapter 13 details:
- Although in most cases the plan payment remains the same, it is possible that adjustments may become necessary should the debtor's income changes significantly.
- If the debtor is unemployed or expects a salary increase after the plan confirmation, the chapter 13 trustee will request that the debtor submit an amended plan whenever the income changes occur.
- The trustee will consider not only the salary increase, but also whether the debtor's expenses have increased as well. In such situations, the disposable income may be unaffected and the plan payment could stay the same.