Chapter 13 Bankruptcy - Wage Earner Plan

Because of its specific nature, the chapter 13 bankruptcy is also known as Wage Earner Plan. As per this type of bankruptcy, the debtors are provided an opportunity to reorganize their finances and put their business on the path of profit making. They are also provided with a repayment plan and they have the obligation to repay the reduced claims of the creditors on a fixed monthly schedule basis.

Advantages Of Chapter 13 Bankruptcy

The chapter 13 bankruptcy has been deigned in a way to protect both the debtors and the creditors. This type of bankruptcy ensures that the creditors get their money back. At the same, it allows the debtors to continue with their existing business operations and regain control of their finances under the expert guidance of the trustee appointed by the bankruptcy court. What is more, the debtors are also protected from foreclosure, garnishment, levy, or similar consequences. This way, we can see that the chapter 13 bankruptcy is advantageous for both the debtors and the creditors.

How To Qualify For Chapter 13 Bankruptcy?

If you are planning to file for bankruptcy under chapter 13 of the bankruptcy code, you must be aware of certain eligibility criteria that you need to fulfill. To start with, you must have a regular source of income that exceeds your reasonable living expenses. If you do not have income enough to pay even your reasonable living expenses, you will not be able to file for chapter 13 bankruptcy. If you have already applied for the same, the bankruptcy court will order you to file for bankruptcy again under chapter 7 of the bankruptcy code where you will not be able to continue with your existing business, as all your assets will be sold off to pay off the debts you owe.

Do You Need To Pay The Full Amount Of Debts Under Chapter 13?

The amount payable as debt repayment will depend upon how much money is left with you on a monthly basis after paying all your necessary living expenses. In some cases, where the amount left is much higher, the debtor is asked to pay the full amount of debts and the repayment plan is designed accordingly. In some other cases, where the amount left is very little, the debtor is asked to pay the partial amount of debts and the repayment plan is designed accordingly. For example, in such cases, the debtor may be allowed to pay 25 cents for each dollar.

However, you should note that filing for bankruptcy is not a matter of choice. It is not that just because you want to continue with your business operation, you can file for chapter 13 bankruptcy and be granted the same. The bankruptcy court will look into all the facts and then make a decision. Therefore, the bottom line is that the more informed you are regarding the various bankruptcy laws, the better decision you can take.

Keywords: