Overview of Chapter 13 Bankruptcy
Chapter 13 bankruptcy—often referred to as a “wage earner’s plan”—is designed for individuals with regular, reliable income who want to reorganize their debts rather than liquidate assets. It allows filers to repay all or a portion of their debts over a structured three- to five-year repayment plan.
How Chapter 13 Works
Under Chapter 13, debtors propose a court-approved repayment plan based on their income, expenses, and overall financial situation. This approach helps individuals catch up on overdue payments while keeping important assets such as their home, vehicle, or other property.
Secured debts, including mortgage arrears or car loans, are given priority and can often be brought current over time.
Unsecured debts, such as credit card balances and medical bills, are paid according to what the debtor can reasonably afford.
Court-Approved Repayment Plan
The repayment plan is a legally binding agreement between the debtor, creditors, and the bankruptcy court. As long as plan payments are made on time, creditors must comply with its terms, and collection efforts remain halted by the automatic stay.
Chapter 13 bankruptcy offers a practical path to financial recovery without immediate asset liquidation. Next, it’s important to understand who qualifies for Chapter 13 bankruptcy and the specific requirements involved.
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Austin Bankruptcy Lawyers
3800 North Lamar Blvd # 200
Austin, TX 78756