Eligibility: To be
eligible to be a chapter 13 debtor, individuals must
meet, among other things, the following two
requirements: (i) they must have a regular income, and
(ii) their debts must not exceed a certain
amount. If the
individual’s current monthly income is less than the
applicable state median income, the plan will generally
be set up for
three years, although the court may approve a longer
plan. If the debtor's current monthly income is greater
than the applicable state median, the plan is generally
for five years.
Chapter 13
is designed to provide for adjustment of debts of an
individual with regular monthly income. Subject to
ceilings placed on total debt, individuals who earn
regular income may reorganize payments, terms and
interest rates, as well as discharge the remaining
portion of debts upon completion of a plan. Chapter 13
allows a debtor to keep property
(such as a home) and pay debts over three to five years.
A chapter 13 trustee will administer the plan,
receiving
payments from debtors and disbursing payments to
creditors. Debtors usually keep their property but must
make regular payments going forward. Debtors receive a
discharge upon successful completion of their plan and
upon finishing a personal financial management
course.
Chapter 13
Advantages:
- Opportunity to save
a home from foreclosure
- Provide
for cure of debtor's mortgage payment over
time
- Provides
protection for
third parties such as co-signors who are liable
with the debtor on consumer
debts
- Acts much
like a consolidation loan
- Creditors
are prohibited from engaging in collection activity
for debts that arose before the bankruptcy
filing
Learn more
about Chapter 13 at:
The
American Bankruptcy Institute
The
US Courts
The
information contained on this website regarding
bankruptcy is intended as an overview and is not
intended to be comprehensive. Further, it is for
informational purposes only and is not to be
considered legal advice. You should consult with
an attorney for advice about your specific legal
situation.
