Chapter 13 of the federal bankruptcy laws gives individuals the right to propose a plan to their creditors to repay their debts. Chapter 13 is also known as a Wage Earner Plan, because it is usually filed by people who earn wages, and they use some of their wages each month to repay the creditors. (Under current law the owner of an unincorporated business can also file a Chapter 13 Wage Earner Plan). Chapter 13 is a great alternative to bankruptcy.
Wage Earner Plans are only available to residents of the United States. Residents of Canada should consider a consumer proposal, which is a very similar procedure.
To qualify under Chapter 13, an individual must have unsecured debts (those not backed by collateral to guarantee their repayment) of less than $100,000 and secured debts (debts backed by collateral, such as a house mortgage) of less than $350,000. A debtor files a Chapter 13 petition listing all debts. Upon the filing, the debtor’s creditors must stop their collection activity while the creditors vote on the plan.
A typical Chapter Thirteen petition would include a repayment plan that lasts up to five years, and is funded by both the debtor’s wages, and by the sale of property of the debtor if applicable. The plan is supervised by a bankruptcy trustee, and must treat all creditors fairly, meaning each unsecured creditor will receive the same number of cents on the dollar.
The repayment plan may require the debtor to pay off only a portion of each debt, or the debtor may receive extra time to repay their debts, or they may receive both lesser payments and an extension of time.
It is these reduced payments that are the big advantage of a Chapter 13 Wage Earner Plan. If you can’t afford to make the full minimum payments of say $1,000 per month on your debts, but you could afford to pay $500 per month, a Chapter 13 Wage Earner Plan may be a great solution.
Even better, the Chapter 13 plan can be approved only by the court; the creditors can object, but the final decision is left to the court. After you have completed all of the payments, you are discharged from all of your debts, except for debts relating to alimony and child support, federal student loans, and taxes.
If you need a break, a research how a Chapter 13 Wage Earner Plan may be the correct bankruptcy alternative for you and your family.
Posted by Editor Bankruptcy Alternatives @ 1:14 pm