What is Chapter 13 Bankruptcy?

A Chapter 13 bankruptcy is also called reorganization or payout bankruptcy for consumers.

It allows individuals with stable income to propose a plan to repay a portion of their debts over three (3)  to five (5) year period.  If the debtor's current monthly household income is less than the applicable state median income, the plan term will be for three (3) years.  If the debtor's current monthly household income is greater than the applicable state median, the plan must be for five (5) years. During this time the federal injunction known as "automatic stay" forbids creditors from starting or continuing collection efforts.  Upon completion of the plan payments, the debtor's personal liability for his pre-petition debts will be discharged (i.e. wiped out).


The discharge in Chapter 13 case is somewhat broader than in a Chapter 7 case.  Debts dischargeable in a chapter 13, but not in chapter 7, include debts for willful and malicicious injury to property, debts incurred to pay nondischargeable tax obligations, and debts arising from property settlements in divorce or separation proceedings.  Section 1328(a).




The information contained on this site is for general education only and it is not, nor is it meant to be, legal advice.  You should seek advice from a bankruptcy attorney for your specific situation.