What is Chapter 13?
What is Chapter 13?
- Chapter 13 is often referred to as “reorganization” or “consumer reorganization”.
- Chapter 13 is often selected by debtors who have valuable assets, such as their home and home equity, that is not covered by exemptions and that they want to keep.
- In Chapter 13, a debtor creates a “plan” in which they will repay creditors via a trustee over a set time period, generally three to five years.
- A confirmation hearing is held in which the court will either approve or disapprove of the plan.
- In this plan period, the debtor will pay creditors overdue payments on assets and pay into the plan the equivalent value of any assets not covered by exemptions.
- Chapter 13 is a bankruptcy ideal for debtors who are employed and/or have an ongoing source of income to make the scheduled payements as per the plan.
- In Chapter 13, the debtor maintains possession of the property of their estate while they are making the payments for the duration of the plan.
- With Chapter 13, there is no immediate discharge of the debts. Payments must be completed before the debt is considered discharged.
- While the debtors is making payments on their plan they are protected from garnishments or lawsuits from their creditors.
- Chapter 13 takes a considerable amount of thought and careful planning with a bankruptcy attorney to assist you with weighing the options.
Remember, these are generalities about Chapter 13 Bankruptcy. Contact a bankruptcy attorney in your area for more specific information. Furthermore, some states have bankruptcy laws that differ from federal laws that you need to be aware of to ensure that you make a sound, informed decision about how to best deal with your debt and your financial future. There are alternatives to bankruptcy that can assist you with reducing your debt, consolidating your debt and helping you to keep your valuable assets intact.
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