Chapter 13 Bankruptcy is generally used for those who either earn too much to qualify for a Chapter 7, or have fallen behind on their house or car and need the opportunity to catch up. In the typical Chapter 13 Bankruptcy, you are placed on a payment plan ranging from 36-60 months to essentially restructure your debt into a manageable plan which fits into your budget.
Once filed, an “Automatic Stay” is put in place, which stays, or in other words prevents, all collection activity while the case is active. If you are facing foreclosure, filing the case prior to the sale date will stop the foreclosure sale. Keep in mind, in Texas, foreclosures only take place on the first Tuesday of the month after the required notices have been properly delivered.
The benefit of Chapter 13 is that the plan allows you to catch up on past due secured payments, such as your mortgage or car note, over a period of 3 to 5 years. Spreading out the payments over a longer term allows you to catch up over time instead of prior to a foreclosure.
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For more information on the Bankruptcy process, please see our Bankruptcy Basics section.