The Chapter 13 bankruptcy is designed for bankruptcy petitioners who have a regular income. The Chapter 13 allows a debtor to keep property and pay debts back over a predetermined period of time, usually 3-5 years. It’s often referred to as a wage earner’s plan. Petitioners work alongside the bankruptcy court to develop a plan to repay all or a portion of their debts.
Under the Chapter 13, debtors propose a repayment plan with installment payments to their creditors over the course of 3-5 years and then fulfill the repayment obligations through the bankruptcy court. Chapter 13 has a few advantages over Chapter 7 bankruptcy, including:
Bankruptcy filers have the opportunity to save their homes from foreclosure/stop foreclosure proceedings.
Bankruptcy filers have the chance to cure delinquent mortgage payments over time. (They are still required to make all mortgage payments due during their Chapter 13 repayment time period).
Bankruptcy filers can reschedule secured debts (other than their primary residence mortgage) and extend them over the life of the Chapter 13 plan. In some cases this can result in lower payments.
Chapter 13 also offers a special provision protecting third parties who are liable WITH the debtor on consumer debts (protection for co-signers).
Chapter 13 acts like a consolidation loan allowing the petitioner to make plan payments to the Chapter 13 bankruptcy trustee who turns around and distributes the payments to the creditors in accordance with the plan.
Under the Chapter 13 bankruptcy repayment plan, debtors have no direct contact with their creditors and enjoy Chapter 13 bankruptcy protection.
If you filed for Chapter 13 bankruptcy for any of the above reasons and your situation has changed, giving you reason to seek an “exit” strategy from your own Chapter 13 bankruptcy repayment plan, the most obvious answer is repayment of all creditors in full. While the answer can vary by bankruptcy district, in most cases a petitioner can exit their repayment plan early by paying back the debt to all creditors involved.
If you have questions or concerns about your Chapter 13 bankruptcy or deciding whether or not you should attempt to exit your Chapter 13 bankruptcy repayment plan, please get in touch with the experienced bankruptcy attorneys at southern California’s Westgate Law as soon as possible.