The Powers and Benefits of a Chapter 13 Bankruptcy Repayment Plan

Chapter 13 Bankruptcy provides an opportunity to control the repayment of debts which you either want to pay or you must repay. “Chapter 13 Bankruptcy” is a repayment plan over a term of 3 – 5 years during which you may repay debts, including delinquent payments on your home mortgage(s), your car note(s) or income taxes. Filing a “Chapter 13 Bankruptcy” case will immediately stop all collection actions, including Foreclosure of your home or Repossession of your auto. Even if there has been a Foreclosure sale of your house, a “Chapter 13 Bankruptcy” case filed before the Foreclosure Sale is Confirmed by the Court will stop the Foreclosure action and allow you an opportunity to repay or “cure” the delinquency which caused the Foreclosure, while you remain current with future payments. Even if your auto has been repossessed but has not yet been sold, the filing of a “Chapter 13 Bankruptcy” will prevent the sale, allow the return of your auto and will provide time for you to pay the debt at a reasonable rate of interest. “Chapter 13 Bankruptcy” will also immediately stop IRS and/or Wisconsin Department of Revenue wage garnishments or other tax levies and provide you time to repay the debt on your own terms.

Even if there has been a Foreclosure sale of your house, a “Chapter 13 Bankruptcy” case filed before the Foreclosure Sale is Confirmed by the Court will stop the Foreclosure action and allow you an opportunity to repay or “cure” the delinquency which caused the Foreclosure, while you remain current with future payments.

In a “Chapter 13 Bankruptcy”, it may not be necessary to fully pay the balance due on your credit cards, medical bills, financed auto and/ income tax debts. Since “Chapter 13 Bankruptcy” may provide control of creditors which are foreclosing on your home, repossessing your auto or garnishing your wages and may also may allow you to force the compromise of some debts and pay them less than the full amount currently due, “Chapter 13 Bankruptcy” may provide many benefits. However, some of the factors which influence your ability to compromise debts and pay them less than what is owed through a “Chapter 13 Bankruptcy” will depend on the size of your household, the income and expenses of your household and the nature of the debts you currently have. This calculation is generally referred to as the “Means Test.” Because calculation of the Means Test can be tricky, it is wise to seek a review of these factors from an attorney who is familiar with these calculations when considering whether a “Chapter 13 Bankruptcy” case may be a beneficial mechanism to control and reorganize your finances.