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How does repayment work in Chapter 13 bankruptcy?

Chapter 13 bankruptcy: let us consider some of the options under this type of repayment plan. Chapter 13 is meant for the filer to reorganize debt in a plan that usually lasts from three to five years. Say you're behind on mortgage payments, and your lender won't give you a modification. This may be a good time to consider Chapter 13 as way of stopping foreclosure.

Kentucky residents faced with this predicament have to be financially prepared in order to make Chapter 13 work. To stop foreclosure, you will have to make delinquent mortgage payments as well as current mortgage payments. Let's look at how that situation breaks down.

The Chapter 13 plan will include the delinquent mortgage payments, and the monthly payments under the plan will be distributed to creditors by a trustee. Meanwhile, you will also have to make your current mortgage payments.

By way of contrast, consider Chapter 7 bankruptcy, which is liquidation bankruptcy and far more common. Under Chapter 7, the filer's non-exempt assets are liquidated and sold to pay back creditors, and in the end the remaining debt is discharged.

Some people still struggle with home loan payments after completing Chapter 7, and in that case, Chapter 13 is still an option. You just have to have the income to keep up with current and delinquent mortgage payments. For many people, that simply isn't an option, and Chapter 13 is not the route for them.

To learn more about the options offered in a bankruptcy repayment plan, readers in Kentucky are invited to visit our Lexington Chapter 13 page. Our firm helps people who are in need of debt relief.

Source:, "Will Bankruptcy Help Mortgage Modification?" Justin Harelik, June 11, 2013

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