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What is Chapter 13 and how is it beneficial?

Tennesseans who are facing financial challenges often do not know where to turn or which potential options are most suitable to their particular situation. Being in debt does not mean that there is no chance for a fresh financial start, but it is important to know which method is preferable. For those who have a job and earn wages, filing for Chapter 13 is a step to consider.

With Chapter 13, the person who has a regular income can formulate a plan to pay back some or all of the debts. Debtors will craft a plan to repay their creditors and do so within three to five years. A debtor who has a monthly income of less than the current state median will have a three-year plan unless it can be extended for cause. If it is greater than the monthly median, it will be for five years. The plan cannot go beyond five years.

Chapter 13 is advantageous because it has several benefits over other options. People who own a home will have a chance to save it from being foreclosed upon. If foreclosure is happening, filing for Chapter 13 will stop that process and might clear delinquent mortgage payments as time passes. All mortgage payments will have to be made while the Chapter 13 is in progress. It is also possible for secured debts to be rescheduled. This is separate from the mortgage of the debtor's primary residence. Extending these payments during the Chapter 13 can reduce the payments.

Third parties who are liable for consumer debts of the person who is filing for Chapter 13 are protected. The Chapter 13 is similar to a consolidation loan with the person making payments to a trustee who subsequently distributes the payments to the creditors. With Chapter 13, the contact between the debtor and the creditor will stop. For people who have a job but are unable to make their payments to creditors, Chapter 13 bankruptcy is a way to stop foreclosure, retain a home and pay back some of the debt over a period of time. Discussing the matter with an attorney can help to determine if this is the best strategy to take or if another choice is better.

Source:, "Chapter 13 -- Bankruptcy Basics -- Background; Advantages of Chapter 13," accessed on Jan. 31, 2017

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Mark T. Young & Associates
2895 Northpoint Blvd.
Hixson, TN 37343

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