Chapter 13
Posted on 12. Mar, 2009 by emmettjones in Bankruptcy
Chapter 13 is typically known as the “reorganization” bankruptcy. The reorganization usually applies to the debtor’s secured and unsecured debts. In a Chapter 13, debtors are put into a plan that looks to pay back only a portion of what is owed to their unsecured creditors, while either continuing to keep current on their secured debts or a combination of catching up on any arrearages they may have while continuing to stay current. Under the current bankruptcy provisions, a debtor can file a Chapter 13 bankruptcy as often as needed, as long as those bankruptcy filings are filed in good faith.
A Chapter 13 bankruptcy typically lasts in between 3-5 years, with the debtor having paid any sort of arrearages on secured debt and receiving a discharge from any unpaid unsecured debt. Assuming the debtors stay current on their Chapter 13 plan payments, they are able to keep their house, vehicle, and other property.
Chapter 13, your credit score, and your credit report
A completed Chapter 13 bankruptcy typically stays on a debtor’s credit report for seven years and up to ten years. Which means that if you received a discharge today, and checked your credit report 8 years from now, the fact that you filed a bankruptcy would probably not be shown on your credit report. The more important issue though, seems to be those matters related to a debtors credit score and the ability to obtain credit after bankruptcy. Obviously, when a bankruptcy is filed, the debtor’s credit score is going to drop dramatically, but it does not necessarily preclude the debtor from obtaining credit in the future. Part of a lenders’ determination of credit-worthiness is an examination of the borrower’s current debt. In normal Chapter 13 cases a borrower’s unsecured debts are either discharged or paid off, at the end of the case, so obtaining credit is certainly not an impossibilty. In fact, many debtors are actually able to obtain credit even during their Chapter 13 bankruptcy, pending court approval of financing.
