Chapter 13 is a “reorganization bankruptcy” type that allows debtors to repay all, or a portion, of their debts in three to five years under a court-approved plan. Chapter 13 bankruptcy is also called a “wage earner’s plan.” that lets individuals with regular income to develop a plan to repay their debts. If the debtor’s monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period.
Unsecured debts such as alimony, student loans, and child support must be paid in full, and payments on houses and cars must be kept current during the repayment period if you wish to keep those assets.
Chapter 13 vs. Chapter 7
Chapter 13 is not like a Chapter 7 bankruptcy, your debt will not be wiped clean in three to six months with no repayment plan. Chapter 13 is handled by your court-appointed trustee to manage the money in your estate and see that your creditors are being paid from your one monthly payment to the court.
How it Works
A petitioner and their attorney create a payment plan to be approved by the court and repaid by the debtor over several years. At the end of that period, unsecured debts that remain unpaid will get discharged. In Chapter 13 bankruptcy, the most common debts that get discharged are credit cards, medical bills, and personal loans.
Creditors are forbidden to continue with collection efforts after the court accepts your repayment plan. That by itself might be a great relief when filing bankruptcy.
Contact a Plano bankruptcy attorney to find out if you can get financial relief while keeping your assets with a Chapter 13 bankruptcy.