About Chapter 13
Chapter 13 is a consumer reorganization Chapter of the Bankruptcy Code. Chapter 13 is designed for individuals with regular income who are unable to pay their debts as they become due.  An individual may qualify so long as their debts are less than $2,750,000.00.  Chapter 13 is commonly utilized by individuals who have missed mortgage payments, owe non-dischargeable taxes or child support debts, want to utilize lien stripping provisions of the Bankruptcy Code, or would be unable to utilize Chapter 7 without losing some of their non-exempt assets.

Once a petition is filed under Chapter 13, the individual submits a repayment Plan to the Court for the Court's approval. The individual makes monthly payments to the Court appointed Trustee under the Chapter 13 Plan.  The Plan must meet certain requirements regarding treatment of Creditors and the Debtor's disposable income to be confirmed.  The Chapter 13 Plan allows the individuals to repay their outstanding debts in installments over a three to five year period under the Court's supervision.  The Chapter 13 Plan is binding on both the Debtors and the Creditors.  After completion of the installments under the repayment Plan, an Order is usually entered discharging the remaining debts owed.

The benefits of Chapter 13 are tremendous.  In a Chapter 13 Plan, your mortgage company can be forced to accept a repayment plan over a three to five-year period.  This is a lot more manageable than trying to come up with a one-time cure payment to catch up on your mortgage.  Some mortgage companies will work with you with what they call loss mitigation options.  However, there is nothing that is more powerful than a Chapter 13 bankruptcy case to save a home. 

The Debtors have a right to dismiss their Chapter 13 bankruptcy case.   The bankruptcy case may also be dismissed in the event the individuals fall behind in their payments or are unable to make a payment which is due under their Plan.   Some other reasons why a case might get dismissed are:

  1. Failure to comply with an Order of the Court.
  2. Failure to comply with the Trustee’s directive.
  3. Failure to initiate Plan payments.
  4. Failure to make Plan payments.
  5. Making Plan payment with a personal check that was returned for non-sufficient funds.

Many cases are dismissed or converted to Chapter 7 prior to completion of the entire term of the Plan.  Chapter 13 bankruptcy requires discipline and the ability to live within a strict budget.

Upon confirmation, the Court may enter an Order requiring that payments may be deducted from the Debtor's wages during the bankruptcy case.  If the Debtor has a job with regular income, the Bankruptcy Court will probably order that the Debtor's Plan payments be made automatically by the Debtor's employer and sent to the Court appointed Trustee.

This is not intended to be a comprehensive description of Chapter 13 and specific questions should be directed to an attorney.

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