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Most people file Chapter 13 bankruptcy to protect assets that might not be fully protected
from creditors. The most common reasons people file Chapter 13 are as follows:
To catch up on delinquent mortgage payments or real estate taxes. In Chapter 13, a debtor can pay the delinquent amounts over a period of 36-60 months and protect their property from foreclosure.
To restructure automobile loans with high payments, high interest rates, or payoff balances that exceed the value of the vehicle.
To pay back income taxes, child support arrears, and other
priority debts without any additional interest or penalties
To protect assets that might be subject to auction or sale. By paying back creditors a percentage of their debt through a Chapter 13 plan,
Chapter 13 allows debtors to maintain existing accounts and
relationships that they have with the creditors. The exact repayment amount is determined by a variety of factors, including the value of assets and monthly income.
To obtain a partial discharge of unsecured debts (such as credit cards) when a person's income is too high to qualify for Chapter 7.
Unlike Chapter 7 bankruptcy cases which are generally
concluded in approximately 90 days, Chapter 13 plans last
anywhere from 36-60 months. While you are in Chapter 13, you
will make weekly or monthly payments to a court appointed
trustee, who in turn will make payments to creditors on your
behalf.
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