What is a Chapter 13?

What is a Chapter 13? - There are several types of bankruptcy.  We have all heard about the huge Chapter 11 cases of Enron and WorldCom or United Airlines.  Chapter 11 is generally reserved for the 'rehabilitation' of businesses.  A Chapter 13 case is a similar proceeding for families.  Instead of discharging your debts without payment, you may propose a plan to repay your creditors over time.   Your repayment plan can be for only a percentage of what you owe paid over a number of years.  This is not without serious cost. The Court-appointed Trustee will criticize your budget to maximize your payments to creditors and will charge you a 'service charge' of 10% of all payments.  The payment plan will last from 3 to 5 years based on your ability to pay.  As a result, these types of bankruptcy are better reserved for cases when the goal is to pay mortgage arrearages in the face of a foreclosure.  However, Congress now requires individuals to file Chapter 13 if they make more than the median income for your area.

Disposible Income

The Plan