For debtors looking to get out from under crippling monthly payments, the bankruptcy laws of the United States have a myriad of avenues to explore to seek release. One of the most popular approaches, filing a Chapter 13, aim to help settle any outstanding debts through a reorganization process.
Unlike a Chapter 7, a debtor in a Chapter 13 action submits to the court a plan that aims to pay all or a portion of their outstanding debts. This plan must be approved by the court, but once approved it provides legal protection against creditors looking to receive payment outside of the framework of the court’s
The Debtor makes regular payments to the bankruptcy trustee, who collects the money and disburses funds to outstanding creditors as indicated in the approved plan. Once the debtor meets the agreed upon terms of the Chapter 13 bankruptcy, the remaining debts are discharged and the debtor released from the legal obligation to repay the remainder of their dischargeable debt.
What is a Chapter 13 Bankruptcy?
A Chapter 13 bankruptcy affords debtors the opportunity to restructure their debts so that they can arrange a payment plan. Debtors looking to get a handle on their current debt under Chapter 13 bankruptcy protection do so with an eye towards meeting the bulk of their financial responsibilities under a guided court-approved repayment plan.
How Does Chapter 13 Differ from a Chapter 7?
The two most popular bankruptcy filings are Chapter 13 and Chapter 7. One difference between the two is how non-exempt property plays in the process. For instance, Chapter 13 bankruptcy filers keep their creditors at bay by guaranteeing that a portion of their future earnings to help pay as much debt off as possible under their financial circumstances.
Normally, a Chapter 13 bankruptcy is more expensive and takes longer to execute than a typical Chapter 7 filing. This is the preferred option for debtors who want to repay most of their unsecured debt, are ineligible to file a Chapter 7 bankruptcy, or have valuable unsecured property that they do not wish to surrender under the provisions of a Chapter 7 bankruptcy.
What is a Chapter 13 Bankruptcy Plan?
A Chapter 13 bankruptcy plan is a roadmap back to financial solvency. This written roadmap is submitted to the court for approval and indicates how much money and property will be paid over to the bankruptcy trustee to help settle outstanding debts. The plan not only details dollar amounts, but it also designates how long the repayment program is expected to last. Once all the terms and conditions of the Chapter 13 bankruptcy plan have been met, the court will go through the documentation to ensure the debtor’s compliance with the terms of the agreement.