What is chapter 13 bankruptcy and how does it work?


A chapter 13 bankruptcy provides a process for repaying all or a portion of one’s debts under the supervision and protection of the bankruptcy court. This same framework is also a great vehicle for getting current on past due mortgage or car loan payments. In a chapter 13 case, the debtor must submit to the court a plan for the repayment of all or a portion of his or her debts. The plan must be approved by the court to become effective. If the court approves the chapter 13 plan, most creditors will be prohibited from collecting their claims from the debtor during the course of the case. The debtor must make regular payments to the chapter 13 bankruptcy trustee, who collects the money paid by the debtor and disburses it to creditors in the manner called for in the plan. Upon completion of the payments called for in the plan, the debtor is released from liability for the remainder of his or her dischargeable debts.