The next most common form of Bankruptcy is Chapter 13. This Chapter of Bankruptcy cases is reserved for individuals, not businesses. A Chapter 13 is a reorganization of the individual’s debts within the confines of a three-to-five-year repayment plan. In this Chapter, the individuals are telling the Court and all involved creditors that they do have some money to pay back the unsecured debt, but maybe not all. The Court examines the individual’s income and reasonable and necessary expenses. From there, a payment plan is developed. That payment plan dictates what creditor is paid and how they are paid. In addition to income factoring into how this plan works, a person’s assets also factor into the equation. Depending on how much assets a person has, their payment plan could be affected by that figure. At the end of the Chapter 13 case, the individual does in fact receive a Discharge, erasing their obligations on certain debts.
There are several reasons why an individual might opt to do a Chapter 13 case. Three common reasons for a person doing a Chapter 13 case are if the income is too high for a Chapter 7, if they don’t want to risk certain assets in the Chapter 13, or if they have delinquent mortgage payment that need to slowly pay back within Chapter 13.
