Chapter 13 Bankruptcy
Chapter 13
Chapter 13 bankruptcy is “reorganization bankruptcy.” Many people file a Chapter 13 bankruptcy to halt foreclosures or repossessions. It can allow you to stay in your home or keep your car if you are behind on payments and need to catch up. Examples of other reasons why people file Chapter 13 are: to protect an asset or assets that would otherwise not be protected, ineligibility to file again because of a recent discharge, or ineligibility because the debtor doesn’t qualify. There are significant benefits to Chapter 13 bankruptcy such as cramdowns and lien stripping.
For Chapter 13 relief, you must earn wages or have some other source of regular income and you must agree to pay part of your income to your creditors through a repayment plan.
The court must approve your repayment plan and your budget. A trustee is appointed and will collect the payments from you, pay your creditors, and make sure you live up to the terms of your repayment plan.
The plan will last not less than 3 years and up to 5 years. After you complete the plan, you will receive your discharge. The discharge in a chapter 13 case is somewhat broader than in a chapter 7 case. Debts dischargeable in a chapter 13, but not in chapter 7, include debts for willful and malicious injury to property (as opposed to a person), debts incurred to pay nondischargeable tax obligations, and debts arising from property settlements in divorce or separation proceedings. 11 U.S.C. § 1328(a).