The Bankruptcy Law Center
Law Office of Don Provencio, PA
Albuquerque, NM

The Bankruptcy Law Center - 505-242-STOP (7867)

Chapter 13 bankruptcy can do much more than a Chapter 7 bankruptcy. If you are sick and tired of harassment from the IRS or State taxing authorities and/or living under threats of foreclosure or repossession then filing for Chapter 13 bankruptcy might be the best choice available. A Chapter 13 bankruptcy also enables you to keep assets the trustee would have taken in a Chapter 7 bankruptcy provided you pay the value of those non-exempt assets to your unsecured creditors through plan payments in a Chapter 13.

How Does Chapter 13 Work?
Unlike Chapter 7 which consists of a short liquidation process capped by a discharge of your debt, Chapter 13 is made up primarily of a payment plan. This payment plan - typically lasting between three and five years - is overseen by a trustee. Shortly after your final payment any remaining dischargeable debts will be wiped away.

Why Chapter 13?
For many consumers who are over the median income in New Mexico, Chapter 13 is the only debt relief option available to them because of their inability to qualify for Chapter 7 relief which is due to changes in the Bankruptcy Code. For others, Chapter 13 is simply a better fit for their situation. Chapter 13 helps those who have fallen behind on their mortgage payments but still want to keep their home by forcing Mortgage Companies to accept payment of all mortgage arrears over a period of time through monthly plan payments to the Bankruptcy Court. Usually, a Mortgage Company will want all mortgage arrears paid at once to forestall a foreclosure but with a Chapter 13 you can force the Mortgage Company to accept arrears on your schedule over three to five years while remaining in your home.

Chapter 13 helps those with outstanding tax debt in several ways provided you qualify for a discharge and you make all payments in a Chapter 13 plan. First, pre-filing tax penalties are considered unsecured debt so you may not have to fully pay penalties through a Chapter 13 bankruptcy. Second, you usually do not pay interest or penalties on the back taxes you are paying through the Chapter 13 plan. Third, you impose your own payment plan on the IRS or State taxing authority for the back taxes you owe. Those with large tax debts derive much benefit from a Chapter 13 because of not paying most penalties and avoiding most of the interest on those taxes when the interest would have had to be paid outside of Bankruptcy through a payment plan with the respective taxing agencies.