Chapter 13 Overview
This bankruptcy allows people with steady income to create a repayment plan for their debts. The payment plan is usually spread out over a 3-5 year period but cannot exceed 5 years. After a Chapter 13 bankruptcy has been filed creditors cannot start collections or continue to attempt to collect debts.
The most significant difference between Chapter 7 and 13 is that Chapter 13 allows the person to prevent their home from being foreclosed upon. It also stops any proceedings and sets up repayment for the money that is owed so long as the person makes the payments as they are due under Chapter 13.
Chapter 13 also shields any “3rd party” who could be held liable. An example would be a co-signer on a loan.
Chapter 13 basically consolidates debts into one affordable payment. The person makes their payments to a trustee who then makes payments to the creditors.
Eligibility:
- Any individual or person, employed or self-employed (BUT NOT incorporated), with unsecured debts under $337,000 & secured debts under $1 million..
- Corporations CANNOT file Chapter 13
- A person also must attend credit counseling in the 6 months prior to filing.