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Chapter 13 – Reorganization

A chapter 13 bankruptcy allows a debtor to reorganize their current debts into a more manageable payment plan.  This allows the debtor to retain their assets but commits a portion of their future income to paying creditors over a period of three to five years.  The amount and duration of these payments are subject to a number of factors, including the amount of the debts, the amount of assets, the amount of the debtor's income, and the amount of the debtor's total expenses.  

Certain creditors, such as unsecured creditors, will typically be paid less than what is owed, while secured creditors are typically paid the full amount due.  This is determined by the trustee of the US Bankruptcy Court based on the payment plan's calculations. As part of the bankruptcy filing, you and your attorney will submit a proposed plan to the court for approval.  If approved, the plan will be the guideline for your bankruptcy, meaning you will need to adhere to the plan for the duration set forth in the plan in order to receive a discharge by the US Bankruptcy court. 

Putting together a Chapter 13 payment plan is a very intensive process which requires an extreme amount of work, and extensive knowledge of how the Chapter 13 bankruptcy works.  Submitting an incorrect plan could result in the rejection of the plan, or worse, dismissal of your Chapter 13 petition.  This is just another reason you should consult with a Chapter 13 bankruptcy attorney.  

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