Chapter 13 Bankruptcy

Chapter 13 Bankruptcy

The Office of the United States Trustee oversees all bankruptcy cases and defines Chapter 13 as follows:
Chapter 13, often called wage-earner bankruptcy, is used primarily by individual consumers to reorganize their financial affairs under a repayment plan that must be completed within three or five years. To be eligible for Chapter 13 relief, a consumer must have regular income and may not have more than a certain amount of debt, as set forth in the Bankruptcy Code.
Chapter 13 bankruptcy is primarily used to stop a foreclosure, repossession, or other collection action. Chapter 13 allows you to set up a repayment plan with the Trustee that allows you to get current on certain debts while still allowing you to discharge other debts.

You do not have to pay 100% of all debts in a Chapter 13 bankruptcy.

The payment plan must show a good faith effort to repay your creditors. At a minimum, it must pay any arrearages on secured property and domestic support orders as well as paying off all outstanding tax debts. If you can afford to pay more than that minimum amount, then your unsecured creditors share the rest.

A Chapter 13 payment plan can run between 3 and 5 years. At the end of that period, any debts that have not been paid are discharged.

Chapter 13 Requirements

To be eligible for a Chapter 13 bankruptcy, you must:

  • Be a person
  • Be a resident of the United States
  • Complete a consumer credit counseling course prior to filing
  • File in good faith
  • Propose a feasible plan. The plan must meet all of the Court’s requirements and you must show that you can afford to make the payments.

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