CHAPTER THIRTEEN
BANKRUPTCY

A Chapter 13 is a reorganization of a debtor’s finances that allows them to pay back their creditors over a 3-5 year period based on their income and the size of their family.  A debtor files for a Chapter 13 bankruptcy if the debtor has a regular source of income and has not filed a prior bankruptcy in the past 180 days. This type of bankruptcy allows a debtor to propose a plan to repay creditors back payments and restructure debt. 

The debtor is entitled to keep exempt property, just as you can in a Chapter 7 bankruptcy.   However, any property subject to a lien (like a mortgage or a car loan) will have to be paid either directly to the creditor under the original loan terms or thru the Chapter 13 plan, where the debtor can adjust monthly payments, pay back delinquent payments, and sometimes adjust the interest rates and other loan terms.

Provided the debtor makes all plan payments, remains current on taxes, alimony, and child support payments, and there are no objections to a discharge, then the debtor will be discharged from the Chapter 13 bankruptcy at the end of the plan.  The remaining unsecured debt at the end of the plan is discharged, and payments to secured creditors shall continue according to the plan terms  

The debtor proposes a Chapter 13 plan to repay debts with disposable income over a three- to five-year period.  The Chapter 13 Trustee must review and ensure the plan conforms with the law.  Provided no one objects to the plan, it is then confirmed by the bankruptcy court.  The Trustee then disburses the funds under the plan to creditors, and monitors the debtor complies with all requirements of the bankruptcy.