What is Chapter 13 Bankruptcy?
Chapter 13 Bankruptcy is also known as a reorganization bankruptcy. Chapter13 bankruptcy is filed by individuals who want to pay off their debts over a period of three to five years. This type of bankruptcy appeals to individuals who have non-exempt property that they want to keep. It is also only an option for individuals who have predictable income and whose income is sufficient to pay their reasonable expenses with some amount left over to pay off their debts.
Chapter 13 Bankruptcy allows a debtor with a regular source of income to create a repayment plan and regularly pay towards reducing a debt. At first glance, a Chapter 13 bankruptcy appears less desirable than a Chapter 7 filing because Chapter 13 requires ongoing payment into a plan whereas Chapter 7 simply eliminates dischargeable debts. Often, a Chapter 7 filing is more favorable. Nonetheless, Chapter 13 has numerous benefits.
Chapter 13 is frequently referred to as the “wage earner” chapter. Only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than $290,525 and noncontingent, liquidated, secured debts of less than $871,550, or an individual with regular income and such individual’s spouse, except a stockbroker or a commodity broker, that owe, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts that aggregate less than $290,525 and noncontingent, liquidated, secured debts of less than $871,550 may be a debtor under Chapter 13. Under Chapter 13 you repay your debts (or a portion thereof) through a repayment plan. You can usually keep your property, but you must earn wages or have some other source of regular income to be a debtor under this chapter. The Court must approve your repayment plan and budget. A Chapter 13 trustee is appointed, and will collect the payments from you. The trust
Chapter 13 bankruptcy, as recently redefined by the 2005 Bankruptcy Reform Bill passed by Congress, allows indebted individuals with durable income streams to retain some of their personal assets during liquidation. Chapter 13 bankruptcy is similar to Chapter 7 bankruptcy, in that creditors are paid through a trustee appointed to maintain a debtor’s bankruptcy estate. That said, Chapter 13 bankruptcy filers are empowered to keep all of their personal property and assets (although exceptions and exemptions do apply — see your state’s laws for details on the specific protections afforded by Chapter 13 bankruptcy in your area.) More about Bankruptcy Law. One of the stipulations of Chapter 13 bankruptcy is that creditors are entitled to garnish as much as they would normally get under a redistribution in a Chapter 7. The rules for Chapter 13 bankruptcy have gotten much more stringent since the 2005 Reform Law, and individuals must have after tax assets below a certain median line in order
Chapter 13 bankruptcy is a court-supervised debt adjustment procedure, available for individuals with regular income, who have unsecured debts totalling less than $336,900 and secured debts totalling less than $1,010,650. The Chapter 13 debtor files a bankruptcy petition which is virtually identical to the Chapter 7 petition, including a detailed financial statement and listing of assets and liabilities. The filing fee for the court is $274.00. In addition, the debtor typically pays his attorney some portion of the total agreed-upon fee in advance.
