What is Chapter 13 Bankruptcy?

Preparation and filing of a Chapter 13 petition and schedules is identical to the Chapter 7 case process.  However, the Chapter 13 Debtor must also file a "Plan" for repaying some or all of the Debtor's obligations.  Chapter 13 bankruptcy, also referred to as "debt consolidation," or "individual debt adjustment," is available only to individual or married persons with regular income, and whose total liabilities are capped at $250,000 for unsecured debt, and $750,000 secured debt.  Chapter 13 is typically used to restructure debt payments within the Debtor's means.  The Plan is the centerpiece of the Chapter 13 case.  It is a written proposal that may create classes of creditors and propose a stream of payments over a period of 36 to 60 month term.  This is typically accomplished by a entering a court ordered voluntary wage assignment sending money from the Debtor's employer to the Bankruptcy Trustee.  In preparing the Plan, the Debtor must carefully consider and project reasonable living expenses, so as to determine how much the Debtor can pay on a periodic basis.    Ultimately, the Plan is "confirmed"  by the Court, and the Plan becomes a federal court order binding the Debtor and creditors.  Upon successful completion of the payment plan, the Debtor is granted a discharge from all debts that are dischargeable under Chapter 13, and which have not been paid under the confirmed Plan.

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