Chapter 13 bankruptcy is a type of bankruptcy in the United States that provides an individual with the opportunity to propose a plan of reorganization to reorganize their financial affairs while under the bankruptcy courts protection. It is also known as a wage earner's plan, and it enables individuals with regular income to develop a plan to repay all or part of their debts over a period of three to five years under court supervision. Here are some key features of Chapter 13 bankruptcy:
-
Debt Adjustment: Chapter 13 provides for the adjustment of debts of an individual with regular income. It allows a debtor to keep property and pay debts over time.
-
Foreclosure Prevention: Chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that come due during the Chapter 13 plan on time.
-
Co-Debtor Protection: Chapter 13 protects loan co-signers against collection efforts if the bankruptcy settlement obligates the debtor to repay the debt themselves.
-
Plan Approval: Under Chapter 13, the Bankruptcy Court has the power to approve a Chapter 13 plan without the approval of creditors as long as it meets the statutory requirements under Chapter 13. Chapter 13 plans are usually three to five years in length and may not exceed five years.
-
Eligibility: Chapter 13 bankruptcy is only available to wage earners, the self-employed, and sole proprietors.
Overall, Chapter 13 bankruptcy is a way for individuals with regular income to reorganize their finances and repay their debts over time while under the protection of the bankruptcy court.
