Why would someone file a Chapter 13 Bankruptcy?
There are a number of reasons. First, if you are behind on your mortgage payment, then a Chapter 13 can help you get current. A "Chapter 13 Plan" is just like a 5 year note to get you caught up on your notes on the assets that you want to keep. This "Plan" is just like a 60 month note.
If you have a $2,000 a month house payment and you are 3 months behind on your house, the mortgage company is obviously going to want you to pay them $6,000 to get caught up or they are going to foreclose on the property. Well, you may not have $6,000 in your pocket since you are going through financial problems. If you don't want to lose your house, then you need to file a Chapter 13
. That way, you can make your normal monthly payments plus pay back that $6,000 over 60 months (about $100 a month).
Another reason you might file a 13 is because you are facing repossession of a vehicle. Chapter 13 can prevent that.
Also, if you have a large IRS obligation then the penalties and interest the IRS is charging you will cease upon the filing of the Chapter 13 Plan and you can pay your taxes back at 0%.
The overwhelming majority of our Chapter 13 clients pay back nothing to the unsecured creditors!