Chapter 13


     Unlike Chapter 7, which quickly discharges most debts, Chapter 13 is a repayment plan, which usually lasts between three and five years. Chapter 13 is also known as the "save your home chapter," since it is very often used to catch up on missed mortgage payments.

      Chapter 13 does offer some advantages over Chapter 7. One big advantage is that some mortgages can be “stripped off,” that is, taken completely off of a home and fully discharged without paying much, if anything, to the lender. Other mortgages can be “crammed down,” that is, written down in value to the fair market value of the home.

     Even if some, or all of the unsecured creditors have to be paid in a Chapter 13 plan, those creditors are paid at 0% interest. This often results in the Chapter 13 plan payments being about half of what the minimum monthly required payments are before the case is filed. Also, the debts are paid of in 5 years (or less), not the typical 15 years it takes just making the minimum required payments under the original credit agreement, and high interest rate.

     In short, Chapter 13 does offer some favorable options over Chapter 7, to some debtors in specific circumstances.


     If your are behind on your mortgage, a Chapter 13 can keep you in your house, and save it from foreclosure.


     If your income is too high, a Chapter 13 can cut your monthly payments in half, and your repayment time to just a third of what the credit agreement requires.

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Dale Orthner

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