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Excerpts from
Bankruptcy Basics
A Public Information Series of the Bankruptcy Judges Division
Administrative Office of the United States Courts
APRIL 2004
Revised Second Edition

Contents

Introduction

The Discharge in Bankruptcy

Chapter 7. Liquidation Under the Bankruptcy Code

Chapter 13. Individual Debt Adjustment

Background

How Chapter 13 Works

Making the Plan Work

The Chapter 13 Discharge

The Chapter 13 Hardship Discharge

Chapter 11. Reorganization Under the Bankruptcy Code

Chapter 12. Family Farmer Bankruptcy

Chapter 9. Municipality Bankruptcy

SIPA. Securities Investor Protection Act

Bankruptcy Terminology


Bankruptcy BASICS

Chapter 13

Individual Adjustment of Debt

Chapter 13 of the United States Bankruptcy Code is frequently referred to as a "wage earner" chapter, although it is available to individuals with regular income from any source, not just wages.

BACKGROUND

Chapter 13 is designed for individuals with regular income who desire to pay their debts but are currently unable to do so. The purpose of chapter 13 is to enable financially distressed individual debtors, under court supervision and protection, to propose and carry out a repayment plan under which creditors are paid over an extended period of time. Under this chapter, debtors are permitted to repay creditors, in full or in part, in installments over a three-year period, during which time creditors are prohibited from starting or continuing collection efforts. A plan providing for payments over more than three years must be "for cause" and be approved by the court. In no case may a plan provide for payments over a period longer than five years.  11 U.S.C. 1322(d).

Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as the individual's unsecured debts are less than $307,675 and secured debts are less than $922,975. 11 U.S.C. 109(e).  A corporation or partnership may not be a chapter 13 debtor. Id. An individual cannot file under chapter 13 or any other chapter if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. 109(g), 362(d) and (e).