Mortgage Reinstatement. One of the most powerful features of chapter 13 is that it can stop a foreclosure sale and allow you to get caught up on the missing payments over time. Chapter 13 can be filed right up until the public auction at foreclosure takes place and still stop the foreclosure from going through -- and save your home Chapter 13 can also be a powerful tool in dealing with IRS debt.

Chapter 13 Plan. The heart of a Chapter 13 is your plan of reorganization where you promise to pay to the Court a certain amount of money each month. In return for this, the court makes all your creditors leave you alone and stops the harassment. The court splits up your monthly check among your creditors and this keeps going usually for 3 years. If you make all your payments as agreed, then at the end of the plan the court will forgive you of the balance of many of the debts that were not paid in full. You would, of course, have to continue making payments on your home. The monthly payment you agree to can be taken out of your wages so that you never have to bother with it.

The battleground in Chapter 13. The sticking point in Chapter 13 is the struggle over the amount of the monthly payment you must make to the Court under your Chapter 13 Plan. Since you are only allowed to keep each month the portion of you income which is both "necessary" and "reasonable" (in amount), you can see that every dollar you spend of your income is one dollar less that is going to go to the court. The creditors realize this and their Champion, the Chapter 13 Trustee, realizes it too. So the Trustee wants you to spend less on your family and contribute more. Some Chapter 13 Trustees are more aggressive than others on this score, but those that are rabid are so stingy with the amounts they consider reasonable that it makes the process more adversarial than perhaps it should be, thus leading bankruptcy attorneys to steer their clients clear of Chapter 13 and towards Chapter 7. One of the real difficulties is that the Courts and Trustees seem to believe that all monthly expenditures neatly fall into set categories like rent, food, and insurance. They seem to forget that in real life, lamps break and need replacement; roofs leak and need repair; your kid ruins your electric mixer while making mud cakes and the mixer needs replacement. Almost nothing sold at WalMart fits in to the "neat" categories of monthly expenses, yet we all shop there and the items we buy don't feel like luxuries, do they? These miscellaneous expenses make many "budgets" unrealistic. In reality, the Trustee and your attorney have to negotiate these monthly payments. If negotiations fail, then the argument spills over into court where the bankruptcy judge must settle the issue.

Keep more of your property. One feature of Chapter 13 than many clients find attractive is that they are usually able to keep all their property. Unlike a Chapter 7, where debtors turn over their nonexempt property over to the Trustee for Distribution to creditors, in a Chapter 13 the debtor turns over to creditors along series of monthly payments that total up to even more cash than the creditors would have received if the debtor had chosen to file Chapter 7 instead. So Chapter 13 can be good for the creditors and good for the debtors.

Can you file a Chapter 13? If you have excess income each month, usually yes. However, many people in North Central Florida who file for bankruptcy do not really earn enough each month to properly take care of their family's monthly needs, much less have extra money to make payments to creditors. Here are some rough guidelines (mine, not the Court's) to see if you have "excess income" each month. I figure it takes a single person about $1500 per month take home to barely make it. For a couple, $2,000. For a couple with one kid, $2,300. For a couple with two kids $2,500. If you have unusual medical expenses like expensive prescriptions or a high mortgage payment, add some more. If your car is paid for, take a little off. Now, do you have excess income each month? If yes, Chapter 13 may be for you.