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Chapter 13 Bankruptcy
Chapter 13 Bankruptcy is a three to five year debt consolidation and repayment program, in which your debts are pooled together, split up into different categories, and then treated in a certain manner depending on the classification of debt and the specific circumstances of your case.

A common misconception is that if you file for Chapter 13, then that means you have to pay back all of your debt. While this is true in a small percentage of cases, most people do get a partial discharge in Chapter 13, similar to the discharge they would have gotten in Chapter 7. In fact, because Chapter 13 has so many benefits that Chapter 7 does not have, there are many ways in which people who file Chapter 13 can wind up better off than those who file Chapter 7.

Virtually anyone can qualify for Chapter 13, provided their debts are not excessively high. Your income cannot disqualify you, though it does play a big role in whether or not your unsecured creditors get paid (and how much they get paid).

Anything else that might have been problematic in Chapter 7 Bankruptcy can, one way or another, be mitigated in Chapter 13. For example, in Chapter 13, non-exempt assets are not seized by the trustee. A prior bankruptcy discharge will not disqualify you from filing Chapter 13 (though it may affect eligibility for a discharge). Other issues, such as excessive gambling losses, recently-incurred debt, preferential payments to certain creditors, and transfers of property - all of which could be problematic in Chapter 7 - are usually resolved much less harshly in Chapter 13.

Other than avoiding problems and qualification issues in Chapter 7, Chapter 13 also offers some extra benefits, including:
  • the ability to include debts that are non-dischargeable, including student loans, taxes, and child support
  • the potential to reduce the principal balance and interest rate on auto loans and other secured loans
  • the ability to cure arrears and prevent home foreclosure and vehicle reposession
  • the ability to protect codebtors