Pierce & Shows, APLC

How does Chapter 13 work?

If you are one of the many people in Louisiana who is in need of help to manage your debt, you might be wondering if bankruptcy is right for you. When evaluating this option, it is important to know that there are multiple forms of consumer bankruptcy. Chapter 7 bankruptcy may be the most commonly known and used but there are times when a Chapter 13 might be the better option. One example is when you have a home or other assets that you do not want to lose.

As explained by the United States Courts, a Chapter 13 bankruptcy is essentially a form of organized debt consolidation and repayment. Instead of all of your debts being immediately discharged, you enter into an agreement to make payments to a trustee. The trustee then pays your creditors based on a plan negotiated with each one. A creditor might end up receiving less than the full amount owed but they still receive something instead of nothing.

A Chapter 13 plan is set to run for a period between 36 months and 60 months. These plans may allow you to get relief from foreclosure actions and give you time to get current on your mortgage payments. You will need to make your mortgage payments in addition to the bankruptcy plan payments during the process.

This information is not intended to provide legal advice but is instead meant to let residents in Louisiana get a basic understanding of Chapter 13 bankruptcy plans, how they work and how they are different than Chapter 7 plans.

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