What is chapter 13 bankruptcy?
Chapter 13 bankruptcy is a reorganization of debt, much like a consolidation of debt. Under Chapter 13, a debtor agrees to work with the court’s trustee to structure a repayment plan to clear most or all of their debt. The court appointed trustee will prepare a plan for repayment based on the debtor’s income and living expenses. The time allotted for the plan is 3 to 5 years. During this time, payments are made to the trustee who in turn, pays the creditors.
Why choose Chapter 13 versus Chapter 7
If a debtor does not meet the eligibility requirements under Chapter 7 (e.g. household income exceeds the maximum limits or assets are too high), then Chapter 13 may be a suitable alternative. Chapter 13 offers protection from creditors by restructuring monthly obligations to a more affordable payment and stopping harassing phone calls/collection efforts during the term. It can also be a better choice to stop foreclosure and keep your home. In addition, under Chapter 13, a debtor can keep his/her assets.