CHAPTER 13 REORGANIZATION

Under Title 11, Chapter 13 of the Bankruptcy Code an individual or spouses filing a "joint petition" can propose a financial plan of reorganization that provides a restructuring of certain debts owed to secured creditors and a reduction of amounts owed to unsecured creditors. Basically the debtor repays only an amount that is available after the deduction of allowable household expenses and amounts to be paid to secured creditors. Often for some chapter 13 debtors the amount of unsecured debt to be repaid amounts to less than 20 % of the original unsecured debt.  Chapter 13 debtors are able to retain assets that may otherwise not be exempt under the provisions of a Chapter 7 proceeding. In addition, certain debts may be dischargeable in a Chapter 13 proceeding that may not be dischargeable under a Chapter 7 case.

Chapter 13 proceedings may be used to halt or at least delay foreclosure of the debtor's personal residence. Thus allowing time to cure the mortgage arrearages as part of the debtor's plan of reorganization. The statutory repayment time frame for a Chapter 13 is a minimum of three years and a maximum of five years.

WHAT ARE SOME OF THE OTHER BENEFITS TO FILING A CHAPTER 13 CASE?

* Child support or maintenance arrearages may be repaid in monthly installments over the term of the plan.

* Foreclosure proceeding against the debtors' personal residence may be stopped or at least delayed depending on the specific circumstances of the debtor. The longer the foreclosure proceedings have been in  process the more complicated the legal issues become.

* Other indebtedness associated with the personal residence may also be restructured or even eliminated.

* Stop IRS collection actions. Include back taxes in the plan of reorganization.

* Discharge some divorce obligations (child support and maintenance not included).

* Vehicle loans in some cases can be reduced to the current fair market value of the vehicle. 

Other benefits may apply depending on the debtors' specific case facts and circumstances.

DEBTS NOT DISCHARGIBLE IN CHAPTER 13

Debts not dischargeable in a chapter 13 proceeding include in part:

* Debts paid outside of the plan.

* Most tax debts.

* Debts for restitution or criminal fines.

* Debts for fraud, embezzlement or larceny,

* Debts for domestic support obligations.

* Most student loans.

* Debts owed to creditors who did not receive notice of the chapter 13 case.

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