Tuesday, June 23, 2015

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is the type of bankruptcy used by people to reorganize their financial affairs whiles under the protection of the bankruptcy court. Chapter 13 bankruptcy is technically described as "Adjustment of Debts of an Individual with Regular Income" in the Bankruptcy Code. In many ways, it is similar to chapter 11 which is used by businesses to reorganize.

Chapter 13 Plan

Under chapter 13, an individual is given the opportunity to propose a chapter 13 plan to reorganize their financial problems with all of their creditors, such as mortgages, property taxes, car loans, IRS debt, and credit cards.

The bankruptcy code classifies an individuals debts generally into three classes:


  1. Secured Claims - such as mortgages and car loans
  2. Priority Unsecured Claims - such as certain IRS debt and child support
  3. General Unsecured Claims - such as credit cards
The Bankruptcy Code sets forth various permissive and mandatory provisions for a chapter 13 plan. A typical chapter 13 plan has a term of three to five years.


The payments under a chapter 13 plan are normally made from the debtor's regular wages or other source of income.  The chapter 13 plan payments are made to the chapter 13 trustee who disburses the payments to creditors in accordance with the chapter 13 plan.

Chapter 13 Plan Confirmation

The Bankruptcy Code also provides the requirements to be met for a chapter 13 plan to be confirmed by the Bankruptcy Court.