Generally, chapter 13 bankruptcy is
preferred by debtors who have a valuable asset, such as a property
or home, that is not completely covered by exemptions and that they
wish to keep. This is possible because under Chapter 13 bankruptcy a debtor
proposes a plan to pay creditors over a three to five year period
during which the debtor can make up overdue payments on any assets
and pay into the plan the equivalent value of any assets not covered
by exemptions. Since the debtors plan will require regular
monthly or biweekly payments, Chapter 13 bankruptcy is usually only appropriate
for an individual debtor who has a regular income.
At a confirmation
hearing, the court either approves or disapproves the plan,
depending on whether the plan meets the Bankruptcy Code's of
requirements for confirmation.
Chapter 13 bankruptcy is very different from chapter 7 bankruptcy since
the chapter 13 bankruptcy, debtor usually remains in
possession of the property of the estate and makes payments to creditors,
through the trustee, based on the debtor's anticipated income
over the life of the plan. Unlike chapter 7 bankruptcy the
debtor does not receive an immediate discharge of debts.
The
debtor must complete the payments required under the plan before the
discharge is received.
The debtor is protected from lawsuits, garnishments, and
other creditor action while the plan is in effect. The discharge
is also considerably broader (i.e., more debts are eliminated) under
chapter 13 bankruptcy than the discharge under chapter 7
bankruptcy.
