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| CHAPTER 13 |
| Chapter 13 is a section of the Bankruptcy Code which helps qualified individuals or small proprietary business owners, who desire to repay their creditors but are in financial difficulty. |
| Chapter 13 Bankruptcy is commonly referred to as the "wage earner's plan" and is designed to result in a discharge of debt listed on bankruptcy schedules through a court ordered repayment plan over the course of 36 to 60 months. |
| The main purpose of a Chapter 13, as opposed to a Chapter 7, is to enable a debtor to retain certain assets that would otherwise be liquidated by a Chapter 7 Trustee. Unlike Chapter 7 where you can discharge your existing debts and no longer pay, in Chapter 13 you are supposed to pay off all your debts in order to make a fresh start. |
| Here the debts should be liquid assets meaning, they should be fixed, certain and not subjected to any conditions. Chapter 13 protects individuals from the collection efforts of creditors; permits individuals to keep their real estate and personal property; and provides individuals the opportunity to repay their debts through reduced payments. Another benefit is that the time your Chapter 13 bankruptcy shows on your credit report is less, so it takes less time to rebuild your credit. |
| Only an individual with regular income who owes, on the date you file the petition, less than $250,000.00 in unsecured debt and $750,000.00 in secured debt can file a Chapter 13 bankruptcy, unlike Chapter 7 where no minimum income for a debtor is specified. |
| Secured debts must be repaid in full, but Chapter 13 enables you to cure the defaults over 36 months (or up to 60 months with creditor consent and court approval). You also have the ability to eliminate junior liens from your real property (your mortgages) under certain circumstances and restructure mortgage and other payments. |
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