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Chapter 13 bankruptcy law contains procedures to discharge the debts of individuals or couples who have a regular source of income and are sincere in their intention to pay off their financial liabilities. The law places limits on secured and unsecured debts, which are approximately $269,000 and $870,000, respectively. While secured debts have to be paid in full, those unsecured have to be discharged according to the income of the debtor. It may, however, be noted that incorporated businesses are not covered under this law.
According to chapter 13 bankruptcy law, the debtor can file an application in the bankruptcy court. In the application he has to list his financial assets and liabilities, with a plan of discharging the same. Once the application is admitted, he is required to pay the petition filing fee and administrative charges to the court. The payment is to be made to the court clerk. Chapter 13 also provides for structuring the payment of court fees into installments, to a maximum limit of four.
In case the debtor and his spouse want to file a joint petition, they don't have to pay double the filing and administrative fees. The lists of the assets and liabilities of the spouse have to be submitted to the court. After the court accepts the payment plan, it gives a docket with a number to the debtor, which protects him against any harassment from the creditors. The docket, however, does not protect the debtor against the demands of secure payments like taxes and mortgages.
Chapter 13 law provides for structuring the payment plan in installments to be paid over a period of three years. In certain special circumstances, the period can be extended to five years with the permission of the court.
The court appoints a trustee who coordinates between the court, the debtor, and the creditors. He also facilitates the process of payments. The debtor makes the payment of the installments to the trustee, who in turn disburses it to the creditors according the schedule arrived at in the court. The trustee keeps 3 to 10 percent of the payment as his service charges. The trustee convenes meetings between the debtors and the creditor, along with his attorney. The creditors are allowed to seek clarifications regarding their payments.