What is Chapter 13 Bankruptcy?
In a Chapter 13 case, the debtor must submit to the court a plan for the repayment of all, or a portion of, his or her debts. The debtor must make regular payments to a trustee, who disburses the money to their creditors. Upon completion of the payments, the debtor is released from liability for the remainder of his or her dischargeable debts.
A chapter 13 bankruptcy makes you file a plan detailing how you will pay off some of your debts over a period of three to five years. Appart from making payments, a major difference with a chapter 13 bankruptcy is that it allows you to keep some valuable property like your home even if you are behind on payments or if you have equity in the property which not covered by your state or federal exemptions. Your payments on these types of secured debts will usually be your regular monthly payments plus an additional amount to get catch up.
In a chapter 13 case you file a plan showing how you will pay off some of your past-due and current debts over a period of three to five years. The most important thing about a chapter 13 case is that it will allow you to keep valuable property, like your home or car, even if you are behind on payments or you have equity not covered by your exemptions. Your payments on these secured debts will generally be your regular monthly payments plus some extra amount if you need to get caught up because you are behind when you file.
Chapter 13 is also known as a “wage earner plan” or a “debt reorganization”. As part of Chapter 13, your past due balances are consolidated and you agree to repay them over a period of 3 – 5 years, in addition to continuing to make all current payments. Your monthly payment on the past due debts is determined by your income and expenses, often amounting to less than 10 cents on the dollar.
