Chapter 13 Bankruptcy Explained

Chapter 13 is usually preferred by debtors who have valuable assets like a home which is not covered by exemptions and that they want to to keep. Under Chapter 13 a debtor may propose a plan to repay his or her creditors over a period of 3 to 5 year. During this period the debtor can make up overdue payments on any assets and pay into the plan the value of any assets which are not covered by the exemptions. Because the debtor's plan will require hime or her to make regular monthly or biweekly payments, Chapter 13 may usually only be appropriate for an debtor who is employed or has a regular source of income.

At the confirmation hearing, the court will either approve or disapprove the plan. This will depend on whether the plan meets requirements of the Bankruptcy Code. Chapter 13 and chapter 7 are very different, because unlike the chapter 7 debtor, the chapter 13 debtor will usually remain in possession of the property and will make payments to the creditors, through a trustee which are based on the anticipated income of the debtor over the duration of the plan. Unlike the chapter 7 debtor, the chapter 13 debtor will not get an immediate dischargefrom the court. He or she will have to complete the required payments of the plan before the discharge is received. While the plan is in effect, the chapter 13 debtor is protected from garnishments, lawsuits, and any other actions from creditors. The chapter 13 discharge also has a much broader spectrum. Under chapter 13, more debts are eliminated as compared to the discharge under chapter 7.