Chapter 13 Overview

Chapter 13 – General Information

Generally, chapter 13 is preferred by debtors who have a valuable asset, such  as a home, that is not completely covered by exemptions and that they wish to  keep. This is possible because under Chapter 13 a debtor proposes a plan to  repay creditors over a three to five year period during which the debtor can  make up overdue payments on any assets and pay into the plan the equivalent  value of any assets not covered by exemptions. Since the debtors plan will  require regular monthly or biweekly payments, Chapter 13 is usually only  appropriate for an individual debtor who has a regular source of income.

At a confirmation hearing, the court either approves or disapproves the plan,  depending on whether the plan meets the Bankruptcy Code’s requirements for  confirmation. Chapter 13 is very different from chapter 7, since the chapter 13 debtor  usually remains in possession of the property of the estate and makes payments  to creditors, through the trustee, based on the debtor’s anticipated income over  the life of the plan. Unlike chapter 7,  the debtor does not receive an immediate discharge of debts. The debtor must  complete the payments required under the plan before the discharge is received.  The debtor is protected from lawsuits, garnishments, and other creditor action  while the plan is in effect. The discharge is also considerably broader (i.e.,  more debts are eliminated) under chapter 13 than the discharge under chapter 7.