What is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is a type of debt relief available to individuals and businesses in California. It allows them to reorganize their debts and repay them over a three to five year period. During this time, the debtor is obligated to make regularly scheduled payments to the court-appointed trustee in charge of the case. Chapter 13 is also known as a “wage-earner’s plan” because debtors who are employed and receiving a steady income are the best suited to benefit from this type of debt relief. Debtors are also allowed to keep certain assets, such as their home and car, while they are working through the repayment plan. Under Chapter 13 bankruptcy law, a debtor must have enough disposable income to make payments and must abide by the terms set forth in their repayment plan. Furthermore, the debtor must demonstrate their commitment to creditors, who are responsible for distributing funds to all of the creditors involved in the case. In addition, debtors must also attend counseling sessions and complete a “Certificate of Credit Counseling” form in order to be approved for Chapter 13 bankruptcy. Furthermore, debtors must also attend a hearing where the court will decide if the repayment plan is feasible and if it should be allowed to proceed. Overall, Chapter 13 bankruptcy law allows individuals and businesses to reorganize and repay their debts over a period of three to five years. It is a viable option for those who can demonstrate their commitment to paying off their debt and who have the means to make regular payments.

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