Bankruptcy Chapter 13

Lower Your Monthly Payments
by 57%

Chapter 13 is for an individual debtor who has a regular source of income

Bankruptcy Chapter 13 is preferred by debtors who have a valuable asset, such as a home, that is not completely covered by exemptions and that they wish to keep. This is possible because under Bankruptcy Chapter 13 a debtor proposes a plan to repay creditors over a 3 to 5 years during which the debtor can make up overdue payments on any assets and pay into the plan the equivalent value of any assets not covered by exemptions. Since the debtors plan will require regular monthly or biweekly payments, Chapter 13 is usually only appropriate for an individual debtor who has a regular source of income.

The court either approves or disapproves the plan, depending on whether the plan meets the Bankruptcy Code's requirements for confirmation. Chapter 13 is very different from chapter 7, since the chapter 13 debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtor's anticipated income over the life of the plan.

Unlike chapter 7, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. The debtor is protected from lawsuits, garnishments, and other creditor action while the plan is in effect. The discharge is also considerably broader (i.e., more debts are eliminated) under chapter 13 than the discharge under chapter 7.