Chapter 13 bankruptcy allows individuals who owe less than $1 million in unsecured debt to pay off their debts over three years instead of paying them back in full at once. This type of bankruptcy is also known as wage earner plan or repayment plan.
Chapter 13 bankruptcy is a form of consumer bankruptcy that allows individuals to repay their creditors through a court-approved repayment plan. The debtor has to file a petition with the court before he/she can start repaying his/her creditors.
The purpose of filing for chapter 13 bankruptcy is to allow an individual to keep his/her home and car by modifying his/her mortgage payments, while still making some payment towards his/her other debts. The debtor must make all of his/her regular monthly payments to the trustee (the person appointed by the court) throughout the 3 year repayment period.
The debtor’s income is used to calculate how much money will be paid to each creditor under the repayment plan. If the debtor does not have enough money to pay his/her creditors, then the trustee may reduce the amount that he/she pays to the creditors.
If you are considering filing for chapter 13 bankruptcy, it is important to understand what this means for your credit score. Your credit score is determined based on information about your past borrowing habits and current financial situation. It takes into account how long you’ve had credit cards, how many times you’ve missed payments, and whether you’re currently employed or unemployed.
