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How Chapter 13 works

If you are like many people in Connecticut, you automatically assume that in a bankruptcy, some of your assets might be lost. This may happen if you file for a Chapter 7 bankruptcy but there is another type of consumer bankruptcy that may provide greater protection for your home, vehicle and other assets. That is the Chapter 13 bankruptcy.

As explained by the U.S. Courts, debts are not automatically discharged in a Chapter 13 bankruptcy the way they are in a Chapter 7. Instead, debts are essentially consolidated into one monthly payment that you would make to a trustee. The trustee, in turn, distributes payments to various creditors per an agreed-upon plan. This continues over a period of 36 months on the short end to 60 months on the long end. Once the plan is complete, debts are discharged.

Because payments are required in a Chapter 13 bankruptcy, it is often referred to as a wage earner's plan. Creditors may end up with less than what they were originally owed but they get something rather than nothing. Mortgages are not generally part of a Chapter 13 plan. However, filing for Chapter 13 can put a stay on foreclosure action and give you time to make a plan with your lender and to get current with your mortgage payments if you are behind.

If you would like to learn more about the types of bankruptcy plans and how a Chapter 13 might benefit you and your situation, please feel free to visit the debt relief and discharge page of our Connecticut consumer bankruptcy website.

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