Chapter 13 Bankruptcy

Chapter 13 bankruptcy is another very popular personal bankruptcy, the other being Chapter 7 bankruptcy. Chapter 13 bankruptcy is the personal bankruptcy version of Chapter 11 bankruptcy which is for corporations.

What is Chapter 13 bankruptcy?

Chapter 13 bankruptcy is personal bankruptcy for wage earners because in a Chapter 13 bankruptcy, the bankrupt debtor will have to pay the creditors in some form of repayment plans. Chapter 13 bankruptcy is sometimes referred to as the 'Reorganization Plan'. Unlike Chapter 7 bankruptcy which a majority of debts are discharged, a Chapter 13 bankruptcy merely reorganizes your debts and put you on a payment plan to repay creditors over time. Chapter 13 bankruptcy is also known as a 'Wage Earner's plan'. That means the person filing bankruptcy must have a mean (i.e. income) to carry out the payment plan set forth by the Chapter 13 bankruptcy court. See chapter 13 bankruptcy laws for information on who are eligible to file chapter 13 bankruptcy.

How do I pay creditors under the Chapter 13 bankruptcy?

With a Chapter 13 bankruptcy, the person filing bankruptcy turns over all disposable income to the bankruptcy trustee for a set period of time. The time you are supposed to turn over all disposable income depends on your bankruptcy case but is often 3-5 years. The bankruptcy trustee will use that money to pay your creditors.

What are the disposable income I need to turn over to the bankruptcy trustee?

All income that is not spent on the basic necessities. Basic necessities include food, shelter and transportation. The bankruptcy court overhearing your personal bankruptcy case will decide if your Chapter 13 bankruptcy plan will work out.

How will the Chapter 13 bankruptcy protect debtors?

Once a Chapter 13 bankruptcy is filed, you are protected from any lawsuits and all forms of harassment. Creditors will not longer allowed to try to collect any debts from you. By the bankruptcy laws, creditors will have to accept what the bankruptcy trustee can offer them in payment. Creditors don't like it but will have no choice. You are protected under the Chapter 13 bankruptcy laws as soon as you file a Chapter 13 bankruptcy.