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Summary

Chapter 13 bankruptcies are known as "the wage earner section" because you have to have an income to use it. Income can include income from a job, self-employment or a family member who agrees to help out.

Under Chapter 13, you are allowed a three to five year repayment plan which details which creditors get paid what each month.

Unlike Chapter 7, Chapter 13 can wipe out back taxes, child support or student loans.

If you are looking for information about what happens after bankruptcy, click here.

For information about finding an attorney to help, click here. 

For more information about Chapter 13 bankruptcy, see:

To Learn More

More Information

Chapter 7 Bankruptcy

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Bankruptcy

Requirements To Qualify For Chapter 13 Bankruptcy

To qualify for Chapter 13 bankruptcy:

  • You must have a steady income and
  • Cannot in 2010 have unsecured debts of more than $360,475 or secured debts of more than $1,081,400.

What Happens During Chapter 13 Bankruptcy

  • You file a plan to pay off your debt over time, usually three to five years.
  • The court appoints a trustee to supervise and administer your repayments.
  • While you're repaying your debts, your creditors can't add finance or late charges to them -- though interest will continue to accumulate.
  • Whatever debt you have at the end of the repayment period -- if any -- will be discharged and you won't have to pay it.
  • Before the discharge is complete, you will be required to take a financial management course from a nonprofit counseling agency.

What If You Can't Pay The Agreed To Schedule?

If you can't pay the agreed to schedule because of a crisis such as a job loss or illness:

You can ask the court to revise the repayment plan. The court can grant a hardship discharge which wipes out most of your debt. Alternatively, (and this is why you can't rely on the possibility of discharge), the court could just dismiss the case entirely. In that case, you will be back where you started -- subject to creditor collection efforts that were stopped by the bankruptcy.

If you can't pay because your income drops:

You can ask the court to convert the case to a Chapter 7 bankruptcy. To learn more, see Chapter 7 Bankruptcy.

Reviewed by: Michael Menkowitz, Esq. Fox Rothschild, LLP Philadelphia, PA