Chapter 13

Known as a reorganization, a Chapter 13 bankruptcy is a form of debt restructuring that allows the debtor to repay creditors according to a court approved 3 to 5 year plan.

A Chapter 13 bankruptcy can permanently stop the foreclosure sale of a debtor’s home by providing a debtor up to five years to catch up on mortgage arrears.

In some Chapter 13 bankruptcy cases, a debtor can “cramdown” a car loan and merely pay the amount that a car is worth instead of paying the amount owed.  In order to do so, the vehicle loan must have been incurred at least 2 1/2 years prior to the Chapter 13 bankruptcy filling date (910 days or more before, see “910 Day Rule”).

Under certain circumstances, a Chapter 13 may be appropriate if a debtor is ineligible to file a Chapter 7 bankruptcy.  This may occur where a debtor’s excess income exceeds a certain threshold.