Chapter 13 bankruptcy is a repayment plan. It is often referred to as a consolidation bankruptcy. It is a wonderful process for people who have been overwhelmed by financial losses such as the loss of a job, medical expenses, or catastrophic events in their lives. Chapter 13 bankruptcy can help those who have fallen behind on their bills, but who have regular income and can make regular monthly payments. A Chapter 13 plan may be just the ticket to allow them to get back on their feet. Chapter 13 is often used to stop a foreclosure or avoid a repossession. In today’s tough economic climate, mortgage companies appear all too happy to foreclose on your home. The filing of a bankruptcy petition in Chapter 13 creates an automatic stay that stops creditors from pursuing their collection efforts. This enables the debtor to get caught up on past due payments over a three to five year period of time, including delinquent mortgage payments, while making ongoing payments to their lenders through a Chapter 13 Trustee.
Everyone’s circumstances are different. Debtors who file bankruptcy petitions under Chapter 13 have different incomes, some are married, some are single. Household size may vary with the number of children in the home or if aging parents are being cared for in the home. Budgets may include house payments, utilities, food, clothing, medical expenses, and a number of other expenses unique to each debtor. However, each plan payment is based on the ability of the debtor to pay something to his or her creditors based on actual financial circumstances present in the debtor’s life at the time of filing. Before any case is filed, budgetary information would be calculated to determine minimum payment requirements for the debtor, all based on income, household size and unique budget requirements.