Chapter 13 bankruptcy is also known as Wage Earner Plan or reorganization bankruptcy. The bankruptcy as per this chapter of the bankruptcy code, is just opposite to what happens under chapter 7 bankruptcy. Chapter 7 bankruptcy is a liquidation process, where all the assets of the debtor are sold off by the trustee appointed by the bankruptcy court, in order to settle his or her debts. On the other hand, the chapter 13 bankruptcy is a reorganization process, where the debtor gets a chance to continue with its existing business, while paying off the debts simultaneously, as per the wage earner plan approved by the bankruptcy court.
Eligibility criteria for chapter 13 bankruptcy
The new bankruptcy laws have now made it mandatory for all the debtors to pass a MEANS test, before filing bankruptcy and it is the reports of the MEANS test that will decide whether you qualify for chapter 7 or chapter 13 bankruptcy. The main objective of the MEANS test is to figure out your expenses and income. You need to make a declaration regarding your income and expenses. The necessary expenses are deducted from your overall regular income, in order to find, if the money thus left can be used to settle the debts. If the money thus left is more than the median income of your state, you can qualify for chapter 13 bankruptcy. Otherwise, you will be asked by the bankruptcy court to file for chapter 7 bankruptcy.
You do not need to pay the full amount of debt
Under chapter 13 bankruptcy, you are not supposed to pay off the full amount of the debt that you owe to your various creditors. You can get away by paying just a certain percentage of the full amount. This will depend upon the total amount of debt that you owe and the total amount of money left to you, after deducting all the essential expenses. For example, you may be asked by the bankruptcy court to pay only 75 cents on each dollar or may be 25 cents per dollar.
Debt repayment plan
The debtors that have been declared bankrupt under chapter 13 bankruptcy are proposed a debt repayment plan. You are supposed to repay the reduced claims of the creditors based on the repayment plan as suggested by the bankruptcy court. As per this plan, the trustee will keep an eye on your business activities and will make sure that you are paying off the reduced debts on the fixed monthly schedule, as determined by the bankruptcy court.
Filing bankruptcy as per the provisions of Chapter 13 bankruptcy allows you to reorganize your finances while paying off the debts simultaneously, based on the wage earner plan as proposed by the bankruptcy court. However, it is the MEANS test that decides whether you qualify for Chapter 7 bankruptcy or Chapter 13. To know more about filing bankruptcy online, bankruptcy costs and other related issues visit Filing Bankruptcy
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