To a certain degree, a Chapter 13 plan may modify creditor rights by restructuring debts (whether unsecured or secured) and the terms pursuant to which the debtor will pay off those debts. [11 USC Section 1325(a)(5)]
A Chapter 13 plan may "cure" defaults and reinstate mortgage and other debts, so as to save the debtor's home, cars, etc. [11 USC Sections 1322(b)(3), 1322(b)(5)]
One of the main advantages of Chapter 13 is that the debtor remains in possession of all assets pending plan confirmation. [11 USC Section 1306(b)]
Chapter 13 bankruptcy is referred to as a reorganization for individual debtors. It provides individual debtors (including small business operators) an ability to organize and resolve their financial problems. It encourages reorganization rather than liquidation.
The key difference from a Chapter 7 is that it allows a restructured way to repay promissory note arrears if your goal is to save your home from foreclosure. Chapter 13 bankruptcy allows Debtors to stop the arrears from “snowballing”, while stopping foreclosure, so the Debtor has a chance to get back on track. As in every case, not everyone will be eligible for chapter 13 bankruptcy and there are debt limits to filing under this chapter. Unlike in a chapter 7, in a chapter 13 a homeowner may be able to strip off or avoid a junior lien and pay the claim off as a general unsecured claim. The ability to strip off or avoid a junior lien depends on the secured claim and the value of the real property and sometimes requires a real estate appraisal or testimony regarding value of the real property. A similar concept is available for vehicles that were purchased more than 910 days ago; the concept is to value the collateral and repay the collateral at its current value rather than the amount owed.
Our attorneys will develop a plan of reorganization for you that fits your personal circumstances. Plan lengths are typically three to five years by which our attorneys will be available throughout the term to help you as your finances and case evolve. Once the plan is confirmed, the plan redefines the terms pursuant to which the debtor will repay his or her debt.