Chapter 13
Chapter 13 - Adjustment of the Debts of An Individual With Regular Income - allows an individual to pay off debt over time. Commonly known as a 'wage earner's plan', this form of bankruptcy is used about a quarter of the time.
Under Chapter 13, debtors work out a periodic payment plan with their creditors to pay off their debts, or at least substantial portions of the debt. Generally the creditors expect to get more than they would have received from the debtor's estate if the debtor had sought a complete liquidation under Chapter 7. One of the benefits of Chapter 13 is that usually the debtor can continue to live at home so long as they comply with the terms of the Chapter 13 arrangement. If the debtor fails to comply, then the Court treats the matter as a Chapter 7 liquidation.
The disadvantage of Chapter 13 to the debtor is that the debts can take years to pay back, hindering a fresh financial start.
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