Chapter 13 Bankruptcy: How It Works

The video below describes how Chapter 13 works.  This is just the starting point to what Chapter 13 can accomplish for those with financial issues.

David Siegel: Okay, so what happens in a Chapter 13? How does it work?

Jesse Barrientes: Well, in a Chapter 13, what happens is all of your assets kind of just go in one place. That’s what you call your estate. And depending upon what those assets are, the bankruptcy trustee kind of makes or pays off the secured and unsecured. With the Chapter 13, you have to be able to pay off 100% of your secured debt and as little as 10% all the way up to 100% of your unsecured debt within 36 or 60 months. So three or five years, that’s what they call the plan. So there’s the term of the plan. It could be any place in between there depending upon what you have left after your allowable expenses. And everything is protected. Generally in a successful Chapter 13, any mortgage arrears, any cars that you own because that’s all included, not least cars but cars that you own, is included in that and so after that term, you come out pretty, pretty good because you don’t have to worry about the penalties and interest and those kinds of things. But everything is paid for so your car now is paid for and you have essentially paid back most of your debt. Just again, it depends on what you have left after that.

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