Bankruptcy Chapter 13 filing is entitled Debt adjustment for Individuals with
Regular Income in the bankruptcy code. This reorganization
of finances is done under a federal bankruptcy code.
In this filing debtor's amount of debt and his disposable income plays very
vital role. A person with less disposable income and huge debts will not be
able to finance a feasible Chapter 13 filing. Chapter 13 bankruptcy usually
takes $185 to file.

How it works?

When a consumer files in chapter 13, he has to present a bankruptcy petition which has the list of consumer's schedule of assets and liabilities. After this he must also submit a repayment plan for Chapter 13.

Repayment Plan

A Chapter 13 repayment plan is a manuscript that is filed immediately or soon after the
case is registered. The plan, in regard of the petition, has a list of all debts,
liens, liabilities and secured assets payable by the defaulter. The plan must
also meet some tests. These tests are carried out according to a states own
laws. It is better to read the states bankruptcy law before developing any plan.
At the minimum it should meet the following;

• The debtor's disposable income has to be committed for a 3 years or 5 years
  plan. The five year plan is on debtor's choice.

• The unsecured creditors get almost the same in chapter 13 as they get in
  a chapter 7.

• The payback amount must be meaningful. This varies from state to state.
  In some states it means once cent payback on a dollar and in some it can be
  20 cents on a dollar.

Following the plan

The Chapter 13 suggested repayment plan is carefully reviewed by all of the creditors. This type of plan usually takes place at a confirmation hearing. The court either approves or disapproves the repayment plan. Basically, the criterion is that the plan must meet the Bankruptcy Code's requirements for confirmation. If none of the creditors have objected, and the plan meets the requirements then the court accepts it and both consumers and creditors have to follow it for the time frame decided.

In chapter 13 the debtor has control of his possessions during the repayment plan. These payments are made via a court-appointed plan. The court grants a discharge only when the plan is complete. The debtor is also protected against any lawsuits or any creditor actions during this period.

Benefits and Advantages

A chapter 13 beneficial if a consumer wants to keep important possessions like their home. A person unable to pay his house payments and facing a possibility of foreclosure can file for chapter 13 bankruptcy. This will not only stop the foreclosure but the consumer can also catch up on missed payments. If the individual is still unable to pay during this reorganization period then the foreclosure proceedings will continue.



Chapter 13 also benefits an individual to achieve discharge of non-dischargeable
debts that are not discharged under chapter 7.

Chapter 13 Disadvantages and Negatives

A disadvantage is that the debtor is not allowed to obtain new credit lines without the trustee's permission. This case may also apply to other chapters of bankruptcy as well. An individual filing in the chapter 13 ends up paying 50% or more of the current debts. Sometimes the court has strict set of rules and if you miss out a payment during this reorganization period you might be pushed to pay the complete debts.

One of the biggest disadvantages of Chapter 13 is that the court only allows you to spend on the basic human necessities not on any luxuries. Due to this most of the times a person filing in chapter 7 bankruptcy is unable to go through the reorganization plan successfully. In fact only one third actually get to the finish line. Also due to the new law most of the people filing for chapter 7, who have a sizable amount of equity, have fair amount of assets or co-signers on a loan, will be shifted to chapter 13.