Chapter 13 of the Bankruptcy Code provides for the adjustment of debts of an individual with regular income permitting a debtor to retain property and pay debts over a time period defined by federal law. By filing a chapter 13 bankruptcy case, debtors propose a repayment plan allowing them to make installment payments to creditors over a period of time lasting no less than three years and no longer than five years. A chapter bankruptcy permits a debtor to propose a plan of repayment to reorganize their financial affairs while utilizing the protections afforded by federal law.

Here are four advantages that chapter 13 reorganization offers over chapter 7 liquidation.

*Chapter 13 bankruptcy allows debtors to consolidate their payments to creditors.

Chapter 13 permits debtors to consolidate their debts whereby the individual makes payments under the chapter 13 plan to a chapter 13 trustee who distributes them to creditors. Individuals are protected from direct contact by creditors during the life of the chapter 13 bankruptcy case, which is significant since this is a minimum of three years and a maximum of five years.

*Chapter 13 helps homeowners avoid foreclosure

Chapter 13 may be a powerful mechanism used to stop foreclosure, thus preventing chapter 13 debtors from losing their homes. When filing a chapter 13, debtors may cure delinquent mortgage payments over the duration of their chapter 13 plan of repayment and reorganization, provided that they have the ability to timely make all future mortgage payments, including those due during the chapter 13 plan.

*Chapter 13 permits debtors to reschedule secured debt

Chapter 13 allows individuals to reorganize their secured debts, with the exception of a mortgage on their primary residence, and extend, and even lower, payments of these debts over the three-to-five year period of the chapter 13 plan.

*Chapter 13 protects co-debtors.

Federal law in chapter 13 of Title 11 contains a provision that affords protection to third parties such as spouses and co-signers who are co-liable with the debtor on “consumer debts.”

To learn more about a chapter 13 bankruptcy, contact us online or schedule a consultation at any of our three conveniently located offices. Alberto Montefalcon has the expertise and experience to assist any potential bankruptcy debtor accurately determine whether a chapter 13 bankruptcy case filing is best for his or her personal financial, situation. Telephone our downtown Sacramento office at (916) 444-0440, our South Sacramento office at (916) 399-9944, or our Concord office at (925) 222-5929 for an appointment today.