welcome to elawyers.us
Elawyers Elawyers
Washington| Change
  1. Home
  2. Learn about Law
  3. Bankruptcy
  4. Chapter 13 Bankruptcy
Chapter 13 bankruptcy is known as a reorganization bankruptcy. Instead of selling off all relevant assets to pay creditors, people who file for Chapter 13 bankruptcy set up repayment plans that use their income to gradually eliminate their debts. It's typically used by debtors whose income exceeds the limits of Chapter 7. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. However, Chapter 13 bankruptcy has its own set of rules and eligibility requirements. This section offers a guide to those rules and requirements, as well as the process involved. This section contains in-depth information about Chapter 13 bankruptcy, including the pros and cons of Chapter 13, how it differs from Chapter 7, how repayment plans work, the debts that remain after a Chapter 13 discharge, and more.

Who Can File for Chapter 13 Bankruptcy?

A debtor must meet the strict requirements to file for bankruptcy under Chapter 13. Unlike a Chapter 7 bankruptcy, which allows the debtor to discharge some debts in exchange for the sale of nonexempt property to pay creditors, Chapter 13 allows the debtor to keep their property and repay creditors in a three- or five-year court-approved repayment plan. Businesses do not qualify for debt relief under Chapter 13; only individuals or married couples.

How Chapter 13 Works

A Chapter 13 bankruptcy begins with the filing of a petition with the bankruptcy court serving the area where the debtor has a domicile or residence. From there, the debtor proposes a 36- to 60-month payment plan to the court to repay his/her debt. A 36-month plan is proposed to the court if the debtor's gross income is below the median income for his/her particular state. If the debtor's gross income is above the median income for his/her state, then a 60-month payment plan will be proposed to the court.

What are a Debtor's Obligations Under Chapter 13?

Debtors have a number of legally-imposed obligations when filing under Chapter 13. These include filing the required forms and documents with the local bankruptcy court in their area, paying a filing fee, making payments in accordance with the proposed repayment plan and, most importantly, sticking to the plan.

Chapter 13 vs. Chapter 7 Bankruptcy

There are two main ways to file personal bankruptcy under the U.S. Bankruptcy Code: Chapter 7 and Chapter 13 bankruptcy. In its simplest form, Chapter 7 wipes out most of your debts and, in return, you may have to surrender some of your property. Chapter 7 doesn't include a repayment plan. Your debts are simply eliminated forever. Chapter 13 involves a repayment plan in which you pay all or part of your debts during a three- to five-year period. In a Chapter 13, you propose a debt repayment plan that requires court approval and thereafter keeps creditors at bay as long as you keep making payments.

Debts that Remain After a Chapter 13 Discharge?

Obtaining a discharge in Chapter 13 bankruptcy will not eliminate all debts. Exceptions to a Chapter 13 discharge include, generally claims for child support and spousal support (alimony); educational loans; any driving under the influence (DUI) liabilities; criminal fines and restitution obligations; certain long-term obligations, such as home mortgages, that extend beyond the term of the plan; and any debts not provided for in a wage-earner plan.

Get Professional Help With Your Chapter 13 Bankruptcy

Getting the right help when you file for Chapter 13 bankruptcy is crucial to its success, whether you file on your own, get a lawyer, or use a bankruptcy petition preparer. Consider seeking a consultation with an attorney to help you decide whether you need legal representation or can simply go it alone. Many bankruptcy attorneys offer consolations free of charge.

Read more

Recent Topics

  • Best Effort Requirement in Chapter 13

    When filing for bankruptcy under Chapter 13, you will need to seek court approval for your repayment plan. Part of getting your Chapter 13 repayment plan approved involves proving that the plan is your “best effort” at paying your debts. To be your b...

  • Chapter 11 and Other Reorganizations

    Although Chapter 7 and Chapter 13 bankruptcies are the most common types of bankruptcy filings, there are other types of reorganization bankruptcies that can be used by both individuals and companies in specific circumstances. Chapter 11 bankruptcy i...

  • Chapter 11 Overview
    Created by FindLaw's team of legal writers and editors.

    Chapter 11 is a form of bankruptcy that’s typically used by corporations to restructure their business and shed their debts. This article offers a summary of the Chapter 11 process and how reorganization works.

  • Chapter 12 Basics
    Created by FindLaw's team of legal writers and editors.

    Chapter 12 bankruptcy is aimed at providing financial relief for family farmers and fishermen. Learn about the eligibility requirements for Chapter 12, the process involved in filing, and much more.

  • Chapter 12: How It Works
    Created by FindLaw's team of legal writers and editors.

    An in-depth look at Chapter 12 bankruptcy. This article provides a step-by-step account of the process involved, including filing a petition, paying administrative fees, the automatic stay, and meeting with creditors.

  • Chapter 12: The Discharge
    Created by FindLaw's team of legal writers and editors.

    Debtors who successfully complete a Chapter 12 bankruptcy will receive a debt discharge. Learn about the effects of the discharge, debts that can’t be discharged, the Chapter 12 hardship discharge, and more.

  • Chapter 12: The Repayment Plan and Confirmation Hearing
    Created by FindLaw's team of legal writers and editors.

    Chapter 12 debtors are required to file a repayment plan, detailing how they intend to repay their debts. This article provides information on how repayment plans work, including how “secured” and “unsecured” claims are treated.

  • Benefits of Chapter 13
    Created by FindLaw's team of legal writers and editors.

    A chapter 13 bankruptcy is also called a wage earner's plan, since it enables individuals with regular income to develop a plan to repay all or part of their debts. Under Chapter 7 bankruptcy, in contrast, all of a debtor's assets (except for specifi...

  • Chapter 13 Bankruptcy and Your Credit

    Filing for bankruptcy in any form will have an adverse impact on your credit rating for as long as it appears on your credit report. However, filing under Chapter 13 if you have the ability to reorganize your finances may cause less damage than filin...

  • Checklist for Chapter 13 Filers
    Created by FindLaw's team of legal writers and editors.

    A helpful checklist of tasks you’ll need to complete in order to successfully file a Chapter 13 bankruptcy. This article offers brief descriptions of crucial steps in the bankruptcy, including the filing, meeting with creditors, and more.

Can't find what you're looking for?

Post a free question on our public forum.
Ask a Question
Search for lawyers by practice areas.
Find a Lawyer