What is Chapter 13?

Chapter 13 bankruptcy is one of the most often used. It is similar to a Chapter 7, but it does not have income limits.

It involves liquidating the assets of the debtor and making payment arrangements over a longer period of time than Chapter 7. Chapter 13 allows a debtor to propose a schedule for repaying debts that seems reasonable to the bankruptcy judge.

It is for individuals who can prove steady income. Often Chapter 7 is filed by people who are impoverished, while Chapter 13 is the middle-to-upper class equivalent.

The debts are not paid off at one time, generally, but on a schedule of a few years. Part of the reason that Chapter 7 doesn’t have a drawn out repayment schedule is because there in no income to support it. For Chapter 13, there is an income to support a repayment schedule.

This filing will also cover repayment schedules for substantial long term debts such as home mortgages and car payments.

Chapter 13 insulates the debtor from any future lawsuits or solicitations from the creditors named in the filing by establishing a trust, to which the debtor pays the debt service payments. The creditors are only permitted to take up their business with the trustee.