The primary benefit of a Chapter 13 Bankruptcy filing is that it can prevent foreclosure of a house or car repossession. A Chapter 13 Bankruptcy allows the debtor to stay collection action by both secured and unsecured creditors by creating a repayment plan. The duration of the bankruptcy repayment plans range from 36 to 60 months to pay back your creditors the outstanding delinquency at time you file your Chapter 13 Bankruptcy. The bankruptcy plan allows the debtor to spread out payments to get caught up on the property over time and prevents the debtor from having to come up with all the money immediately. Along with this primary benefit of stopping a home foreclosure or the repossession of other types of secured collateral, like a car, a Chapter 13 Bankruptcy can also help eliminate most of your unsecured debt. If you complete a Chapter 13 Bankruptcy repayment plan, you will emerge debt free and current on your house and car.

The other main benefit of a Chapter 13 Bankruptcy is the 100% protection of your valuable assets from seizure by your creditors. Although Chapter 7 Bankruptcy provides for some protection of your assets through state created “exemptions,” not all of your property may be completely shielded from seizure. If you own a home or car that that is paid in full or has significant equity, a Chapter 13 Bankruptcy will allow you to reap the benefits of the discharge, the elimination of at least some of your debt, and allow you to keep your hard earned assets.

Finally, a Chapter 13 bankruptcy can yield a “lienstrip” on a second or third mortgage. This has the effect of deeming unsecure any lien on your home placed by a lender, provided that lien has zero equity. This treats the second or third mortgage, then, just like a credit card or medical debt. At the conclusion of your repayment plan, this debt is similarly discharged.