Chapter 13 Bankruptcy can also used by individuals who do not qualify for Chapter 7 because they have too much income or have property that is either non-exempt or exceeds the permitted limits in equity.  Chapter 13 Bankruptcy can be employed to give relief to the cosigner of a debtor.  Chapter 13 Bankruptcy can also give relief to a debtor with non-dischargeable debts such as student loans or taxes.

   In a Chapter 13 bankruptcy, a payment plan is created and administered over a period of three to five years. The Chapter 13 plan is a proposal of what debts will be paid and over what period of time. To qualify for a Chapter 13, the debtor must have enough regular income to pay all of his or her living expenses as well as make payments under the payment plan. The plan must provide for the payment of priority debts such as taxes.  The plan must also provide that secured creditors, such as mortgagees be paid in full.  Any amount that is in arrears to the secured creditors must be paid back under the Chapter 13 plan.  In addition, unsecured creditors who file a claim, such as credit card companies, are usually paid in part or in full. The amount that unsecured creditors receive will depend upon the individual circumstances of the debtor. This determination can only be made after all of the facts of the case are carefully examined.

   There are limits on how much debt can be owed in a Chapter 13 Bankruptcy. Unsecured debts, such as credit cards and medical bills, must be no more than $336,900 and secured debts, such as mortgages and car loans, must be no more than $1,010,650. These amounts are periodically adjusted to reflect changes in the consumer price index. Only individuals may file a Chapter 13 Bankruptcy or self-employed individuals with an unincorporated business may also utilize Chapter 13 Bankruptcy. Corporations or partnerships may not use Chapter 13.

   As in a Chapter 7 Bankruptcy, a debtor that files a Chapter 13 Bankruptcy must complete credit counseling and an education course. The credit counseling and Personal Financial Management  course can only be given by a court-approved organization. The credit counseling must be completed within the 180 days (6 months) prior to the filing of the bankruptcy petition. The Personal Financial Management class must be completed after the filing of the bankruptcy petition, but prior to the conclusion of the bankruptcy. A certificate of completion must be filed with the court.            
Additionally, as with a Chapter 7 Bankruptcy, in a Chapter 13 Bankruptcy there is a hearing, which is known as the first meeting of creditors.  Again, although your creditors are invited to the hearing it is very unusual for any of them to appear. At the hearing the debtor is asked questions by the trustee. The trustee is appointed by the court and is responsible for ensuring that the debtor hasn’t committed fraud. The trustee is also tasked with looking for nonexempt assets for the benefit of the creditors.  After all the trustee’s questions have been asked and answered satisfactorily, the trustee will close the meeting.  If the trustee does have further questions, he or she will schedule a second meeting.

   In addition to the first meeting of creditors, in a Chapter 13 Bankruptcy there is also an additional hearning, called the confirmation hearing.  The purpose of this hearing is for the trustee to decide whether he or she will accept the Chapter 13 plan. If the plan is accepted, regular monthly payments on pre-petition debts will be made to the trustee, who will pay the creditors.  Post-petition debts will be made directly by the debtor to the creditors.