Chapter 13 – Bankruptcy

Chapter 13 – Bankruptcy Basics

This chapter of the Bankruptcy Code provides for adjustment of debts of an individual with regular income. Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.

Background

A chapter 13 personal bankruptcy is likewise called a wage income earner’s strategy. It enables individuals with regular revenue to develop a plan to settle all or part of their debts. Under this chapter, debtors recommend a settlement plan to make installments to creditors over three to five years. If the borrower’s current monthly earnings is less than the appropriate state typical, the plan will be for three years unless the court accepts a longer duration “for cause.” (1) If the debtor’s present regular monthly earnings is above the relevant state mean, the plan usually must be for 5 years. In no situation may a strategy offer payments over a period longer than 5 years. 11 U.S.C. § 1322(d). During this moment the regulation forbids creditors from starting or proceeding collection initiatives.

This chapter discusses six aspects of a chapter 13 proceeding: the advantages of choosing chapter 13, the chapter 13 eligibility requirements, how a chapter 13 proceeding works, making the plan work, and the special chapter 13 discharge.

Advantages of Chapter 13

Phase 13 offers people a number of advantages over liquidation under chapter 7. An additional benefit of phase 13 is that it allows people to reschedule guaranteed debts (various other than a mortgage for their key residence) and extend them over the life of the phase 13 plan. Phase 13 acts like a loan consolidation car loan under which the individual makes the strategy payments to a chapter 13 trustee who after that disperses repayments to financial institutions.

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