What is Chapter 13 Bankruptcy?
Chapter 13 Bankruptcy is that part of the United States Bankruptcy Code is designed primarily for residential homeowners, and allows a person or married couple to pay off all, or a portion, of their debts under the supervision and the protection of the U.S. Bankruptcy Court.
Chapter 13 Bankruptcy is designed for working people, with steady incomes, who are overwhelmed with bills, judgments, lawsuits and other financial concerns. A Chapter 13 Plan is primarily used to repay mortgage arrears, and a percentage, or all, of the money owed to your other creditors, over a 3-5 year period. Chapter 13 can also be used as an alternative to credit counseling wherein an individual can repay their credit card debt over a 3-5 year period without the accrual of additional interest charges.
While a Chapter 13 bankruptcy case is in effect, creditors can not start or continue their collection efforts, and must accept what the plan pays to them. Any individual or married couple, even if self-employed, can receive Chapter 13 relief if they owe less than $389,000.00 in unsecured debt and less than $1,184,000.00 in secured debt.
Upon the successful completion of a Chapter 13 repayment plan, the debtor receives an official discharge and certificate of completion, which extinguishes all obligations to make further payments on unsecured debts, even though these creditors may not been paid in full. In fact, many people in Chapter 13 bankruptcy pay their unsecured creditors no more than 10, 20 or 30 percent of the total amount owed.