Chapter 13 Bankruptcy
When someone files Chapter 13 bankruptcy, their goal is to have the opportunity to repay some or all of the debts. This is different from a Chapter 7 case in which all or some of the debtor’s assets are sold and proceeds distributed to his or her creditors. Instead, Chapter 13 allows the debtor to use future income to pay off the creditors.
Chapter 13 Bankruptcy is designed for people with regular income to fund a court supervised repayment plan. The United States Bankruptcy Code gives the debtor a maximum time span of 5 years to pay off his or her debts. Debtors are allowed to keep all of their property so long as the debtor complies with his or her Court approved plan. The written plan is created in consultation with the debtor’s attorney. It can be approved by the Court even if certain creditors disagree with it. The plan says how much money, if any, each creditor will receive in repayment. Your attorney’s goal is to prepare a repayment plan that complies with the law and best works for your specific goals and needs.
The Chapter 13 Trustee is an appointed, private attorney who administers the debtor’s plan receiving, holding and accounting for the debtor’s plan payments, and by paying allowed creditors’ claims with those funds.
According to the law, all parties, including creditors, must comply with the repayment plan. Creditors can’t collect money from the debtor personally. The primary advantage of Chapter 13 over Chapter 7 Bankruptcy is the debtor is not forced to liquidate his or her property. Once a debtor completes all plan payments, he or she is given a full plan discharge, just like in Chapter 7.