What is the difference between Chapter 13 and debt consolidation?
In Chapter 13, the debtor and the bankruptcy laws decide how much the creditors will be paid. In debt consolidation situations, the creditors are in control. They decide how much they will accept to settle outstanding debt. Chapter 13 is a proceeding in the United States Bankruptcy Court. Everything that happens in a Chapter 13 case is dictated by the provisions of Chapter 13 of the United States Bankruptcy Code. When a person files Chapter 13, the debts owed to creditors become “claims” in the bankruptcy case. The claims are then paid according to the provisions of Chapter 13, which may or may not provide for full payment. In Chapter 13, creditors/claimants do not decide how much they get paid. They have no vote on whether they approve of the Chapter 13 plan. Instead, the court decides whether the plan proposed by the debtor complies with Chapter 13. If the court approves a plan that, for instance, provides for nothing to the unsecured creditors, then the unsecured creditors get no mo
