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Chapter 13

Under current law, a chapter 13 bankruptcy (reorganization) allows the debtor to
reorganize and pay back debt over a three to five year period. The filing of a chapter 13 bankruptcy eliminates the interest rate of unsecured debt and reorganizes late mortgage payments, tax debt, back child support, late car payments, and miscellaneous secured debt. Based on financial circumstances, some debtors are only required to repay a small percentage of their unsecured debt and reduce their secured loans to the fair market value of the security at the time of filing.

The best benefit provided by the chapter 13 bankruptcy is that it combines all of creditor payments into one affordable plan payment. As such, many compare chapter 13 to debt consolidation. However, unlike debt consolidation programs offered by private companies, unsecured creditors must accept the terms of your reorganization plan. The chapter 13, like all bankruptcies, also provides immediate relief from creditor harassment, foreclosures, repossessions, wage garnishments, levies, lawsuits, etc., which are not granted in a typical debt consolidation.

Once the chapter 13 plan is completed, in most cases, the debtor will receive a discharge and can immediately begin rebuilding his or her credit.

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