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How Does Chapter 13 Work?

Unlike some other forms of bankruptcy, a Chapter 13 bankruptcy is available to individuals and businesses alike. A Chapter 13 bankruptcy provides an individual or business debtor the ability to reorganize and restructure the obligations owed to creditors. A Chapter 13 bankruptcy differs from a Chapter 7 and a Chapter 11 proceeding. In a Chapter 7 case, an individual’s debt is discharged. In other words, a person is relieved of most of his or her debt obligation as a result of the bankruptcy proceeding. Similarly, in a Chapter 11 case, a business obtains a discharge of most of the debt it owes to its creditors.

In a Chapter 13 bankruptcy proceeding, a trustee is appointed by the court to develop a payment plan for the debtor. The debtor in turn makes a payment each month to the court appointed trustee, who in turn divides the money between the creditors of that debtor. The court establishes a specific time frame in which the obligations or debts in the payment plan must be satisfied or paid off by the debtor. Pursuant to the U.S. Bankruptcy Code, the maximum length of time for a repayment plan in a Chapter 13 bankruptcy case is five years.

The amount of money a debtor needs to pay each month to the trustee in a Bankruptcy case is based upon that individual’s income and the total amount of debt due and owing to all of the creditors. The failure to make required payments will result in a dismissal of the bankruptcy case.

If you are deep in debt and feel Chapter 13 might be your best option, contact the Westbrook Law Group today. We have helped many clients reorganize their debt while keeping valuable assets. We know how stressful this time can be and will help you through it, giving you the fresh start bankruptcy offers. To learn more about how we can help with your debt, contact the Westbrook Law Group today for a free consultation.