Chapter 13 is a procedure in which a person may repay all or a portion of his or her debts under the supervision and protection of the bankruptcy court. At the time the petition is filed, the debtor must submit to the court a proposed payment plan extending over three to five years. The plan must be approved by the bankruptcy trustee appointed by the Bankruptcy Court and the debtor must make monthly payments to the chapter 13 trustee, who distributes the money to the creditors according to the plan.
Chapter 13 Requirements:
You must have regular income;
No more than $307,675 in secured debts; and
Unsecured debts not exceeding $922,975.
Chapter 13 is most commonly used to stop a mortgage foreclosure, mortgage payments are included in the payment plan and brought current over 3-5 years along with your current monthly payment.
Another situation where a Chapter 13 is used is when a person wishes to repay all or most of his or her unsecured debts and has the income with which to do so. In the majority of the cases, the debtor will pay 10 to 20 cents on the dollar and the debtor will receive a discharge of any unpaid amounts.
The debtor must begin making payments to the chapter 13 trustee within 30 days after the debtor’s plan is filed with the court. If the debtor is employed, a new rule in the Bankruptcy court in South Florida requires the payments to be made by the debtor’s employer. This means that your payment will be deducted from your paycheck.