{"id":286915,"date":"2016-04-04T10:41:50","date_gmt":"2016-04-04T15:41:50","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/bankruptcy\/chapter-13\/chapter-13-background-and-advantages.html"},"modified":"2025-08-08T14:49:36","modified_gmt":"2025-08-08T19:49:36","slug":"chapter-13-background-and-advantages","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/bankruptcy\/chapter-13\/chapter-13-background-and-advantages.html","title":{"rendered":"Benefits of Chapter 13"},"content":{"rendered":"\n
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Benefits of Chapter 13<\/h1>\n\n
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\n By Susan Buckner, J.D.<\/a> | Legally reviewed by Jordan Walker, J.D.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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Chapter 13 bankruptcy offers individuals a way to reorganize their debts and develop a manageable repayment plan while keeping most of their personal property. Unlike Chapter 7 bankruptcy, this type of bankruptcy allows debtors to stop or delay foreclosure, prevent car repossession, and catch up on overdue mortgage, tax, and child support payments through a consolidated monthly plan overseen by a bankruptcy trustee. Filing bankruptcy under Chapter 13 triggers an automatic stay, which immediately halts most collection efforts, wage garnishments, and lawsuits from creditors. This process not only protects co-signers on consumer debts, but also gives debtors the opportunity to rebuild their credit more quickly.\u00a0Chapter 13 bankruptcies\u00a0are\u00a0removed from credit reports sooner than a Chapter 7.<\/i><\/p>\n\n <\/div>\n\n\n\n

Not all debtors qualify<\/a>\u00a0for Chapter 13 bankruptcies. You must have a debt limit below a certain amount, along with\u00a0an income high enough to make your installment payments and provide for your living expenses. If you don’t meet these requirements, you must\u00a0file a Chapter 7<\/a>\u00a0bankruptcy instead.<\/p>\n

Benefits of Chapter 13 Bankruptcies<\/strong><\/h2>\n

Once you file a Chapter 13, the court enters an\u00a0automatic stay\u00a0of all\u00a0debt collections<\/a>. Once you file the bankruptcy petition with the list of creditors, the clerk sends notice to each one. By law, they must stop all collection efforts. These\u00a0include\u00a0legal actions, wage garnishment, and harassing phone calls.<\/p>\n

Some debts are not covered in a Chapter 13. Student loans are not dischargeable in any type of bankruptcy. The automatic stay does not prevent collection of certain debts such as landlord-tenant debts or\u00a0child support arrears. While not a perfect financial\u00a0cure-all, there are still\u00a0many\u00a0benefits to a Chapter 13.<\/p>\n

Debt Consolidation<\/strong><\/h2>\n

A big advantage of Chapter 13 bankruptcy is that it consolidates all your outstanding debts into a single\u00a0payment plan<\/a>. Rather than trying to pay off dozens of bills and creditors individually, your Chapter 13 plan lets you make one payment to the\u00a0bankruptcy trustee<\/a>, who disburses your payment to your creditors. This\u00a0reorganization<\/a>\u00a0keeps your creditors satisfied and helps you get back on your feet.<\/p>\n

The trustee works with you to\u00a0determine your monthly payment based on your income, total monthly expenses, and the IRS requirements. The Chapter 13 bankruptcy process helps pay down your debts by centralizing the payments and renegotiating interest terms.<\/p>\n

Pay Child Support Arrearage<\/strong><\/h2>\n

Although you can’t discharge your child support or alimony arrears, you can include the arrearage in your payment plan. Child support is a\u00a0priority debt\u00a0and is paid ahead of\u00a0some secured debts and all\u00a0unsecured debts. Your payment plan will make the arrears part of your monthly payments so you can catch up with your support obligations while still making your regular child support payments.<\/p>\n

Pay Delinquent Taxes<\/strong><\/h2>\n

If you have back taxes, you know that the penalties and interest\u00a0can accumulate\u00a0quickly. When you file a Chapter 13, penalties and interest are part of the automatic stay. This keeps the amount due from increasing so you can pay down your tax burden in the three to five year period.<\/p>\n

Pay Delinquent Home Notes<\/strong><\/h2>\n

Depending on how the bank structures your mortgage, home loan, or home refinance, you may be able to modify your note and consolidate your payments into a single monthly payment. Some options may include:<\/p>\n