What Is A Chapter 13 Bankruptcy?
Chapter 13 of the bankruptcy code involves rehabilitation of an individual debtor. Chapter 13 is restricted to individual debtors with regular income. Also, only individual debtors who meet certain debt limits are eligible to file under Chapter 13. In a Chapter 13 case, the debtor usually keeps his or her property and prepares a plan providing for payment to creditors over a three to five year period. Unlike a Chapter 11 plan, creditors do not vote on a Chapter 13 plan. The bankruptcy code outlines what the plan must provide and what the plan may provide. The payments under the plan are typically made through the Chapter 13 trustee. If the plan is confirmed by the court and the debtor makes the payments called for in the plan, the debtor receives a discharge.
“Chapter 13” refers to Chapter 13 of the United States Bankruptcy Code (Title 11). In Chapter 13 cases, the debtor proposes a plan to pay back at least some of the debts that are owed. Chapter 13 is often used when Chapter 7 is unavailable for some reason, e.g., if the debtor’s income is too high to qualify for a Chapter 7. Chapter 13 also has many benefits over Chapter 7 as described in more detail below. In a Chapter 13, the debtor keeps all of his property, but pays a set amount each month to the Trustee pursuant to a Chapter 13 Plan the debtor proposes. Chapter 13 Plans usually last 3 to 5 years. After all of the Plan payments have been made, the debtor receives a discharge of even more debts than would be discharged in a Chapter 13 (see below for more information). Chapter 13 is more complicated than Chapter 7 and care should be taken in deciding whether to file Chapter 13.
Under a chapter 13 bankruptcy, a debtor proposes a 3-5 year repayment plan to the creditors offering to pay off all or part of the debts from future income. The amount to be repaid is determined by several factors including the debtors’ disposable income and the results of the means test. To file under this chapter you must have a “regular source of income” and have some disposable income. Most are not required to pay more than 25 percent of their unsecured debts. Corporations and partnerships may not file under this chapter.
Under a Chapter 13 bankruptcy, the debtor proposes a 3-5 year repayment plan to the creditors. This offers to pay off all or part of the debts from the debtors future income. The amount to be repaid is determined by several factors including the debtors disposable income. To file under this Chapter, you must have a “regular and stable source of income” and have some disposable income available each month. Click here for more information.
