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Chapter 13

Chapter 13 is a form of reorganization under the U.S. bankruptcy code.  A debtor under Chapter 13 commits all of his disposable income to a Chapter 13 trustee who makes monthly disbursements toward the person’s creditors.  The determination of what the monthly payment should be is calculated as follows:

The debtor’s income from all sources is calculated.  If the case is a joint case or if the debtor is married, but filing individually, the entire family budget is considered.  The debtor’s expenses are then determined.  Again, if the case is joint or if the debtor is married, the entire family expenses are considered.  The Chapter 13 trustee will scrutinize the budget to make sure that the person is putting all of his disposable income toward the repayment to creditors.

One of the most common uses of Chapter 13 reorganization is to save one’s home.  The mortgage arrears can be structured to be paid back over a period of time while allowing the individual to commence making regular mortgage payments once again.  Additionally, auto loans and all other debt can be restructured in certain cases.  Chapter 13 is especially helpful for someone who definitely has the ability to repay his debts but had fallen behind due to illness, injury, job loss, divorce or other event.

A person receives a discharge under Chapter 13 once the repayment plan is completed.  There are significant limitations and qualifications for filing and receiving a discharge under Chapter 13.  As always, consult with an experienced bankruptcy attorney to see if you can benefit from Chapter 13.