Chapter 13 Bankruptcy - Get the Information You Need

Chapter 13 bankruptcy is often referred to as a wage earner's plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Individuals who have regular income and want to pay their debts but cannot do so in a timely manner can use this chapter.

Under chapter 13, debtors propose a repayment plan to make installments to creditors over three to five years. Under law, creditors cannot start or continue collection efforts during this time. A plan providing for payments over more than three years must be for a reason and must be approved by the court. The plan cannot exceed five years under any circumstance.

All individuals including those who are self employed or operating unincorporated business can avail of Chapter 13 relief. Corporations and partnerships are not eligible for Chapter 13 relief. Eligibility is contingent on the fact that the individual's unsecured and secured debts are between certain dollar amounts that are adjusted annually by statute.

The debtor initiates a chapter 13 proceedings by filing a petition with the bankruptcy court having jurisdiction over the area of the debtor's residence. The filing of the petition is followed by the appointment of an impartial trustee to administer the case. The trustee is entrusted with the responsibility of the disbursing agent to collect payments from debtors due under the plan and, in turn, distribute these payments to creditors.

The regular payments required to be made to the trustee requires the debtor to make adjustments to live on a fixed budget for a prolonged period. The plan payments can be deducted from the debtor's paycheck with the debtor's consent. The debtor will be discharged when he successfully completes all payments under the plan..