The chapter 13 bankruptcy is one that provides for the adjustment of debts of any individual with a regular income. Basically speaking, a chapter 13, which is also known as the wage earner’s plan, allows the debtor to keep the property and then pay off their debts over a period of time that is usually anywhere from three to five years.
Under this particular chapter, the debtors will propose a specific repayment plan for making installments to the creditors over a designated time. If the current monthly income of the debtor happens to be less than whatever the applicable state median is, the plan will be set for a three-year repayment, unless the court makes provisions for a longer payoff period. By the same token, if the monthly income of the debtor is greater than the state median, the plan will usually be set for repayment over five years. There is no provision for any payments lasting a period of anything longer than five years nor are the creditors able to continue on with their collection efforts during this time.
You should know that a chapter 13 bankruptcy is not going to be a perfect fit for everyone. Chapter 13 will require that you use your income as a way to repay some, or even all, of your debt. You will need to prove to the courts that you are able to afford to meet up with the designated payment obligations. If it seems as though your income is too low, you may not be able to file for the Chapter 13.
After the repayment plan is completed, all of your remaining debts that seem to be eligible for discharge can be completely wiped out. Prior to getting the discharge, you have to be able to show the court that you are current on all of your financial obligations.