Chapter 13 Bankruptcy Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Chapter 13 Bankruptcy, written in plain English, along with examples of how it is used.

What is Chapter 13 Bankruptcy?

It is a way of filing a bankruptcy in which the law provides a re-organisation of the assest and finanace including private properties in order to repay the debts owed by the person. Usually it allows 3-5 years time frame for the payment of the debts to the creditors without the creditor claiming the same for the specified period. The creditors may or may not receive the full payment.Thats means the personal assets of the debtors are not liquidated to meet the debts owed.

History and Meaning of Chapter 13 Bankruptcy

Chapter 13 bankruptcy is a type of personal bankruptcy that allows individuals to reorganize their debts under a court-approved repayment plan rather than liquidating their assets. This type of bankruptcy was established as part of the Bankruptcy Reform Act of 1978, which overhauled the bankruptcy code in order to streamline the process and provide better protection for both debtors and creditors.

Under Chapter 13, individuals can retain ownership of their assets and work out a repayment plan over a period of three to five years, during which time they make regular payments to a bankruptcy trustee who distributes the funds to their creditors. At the end of the plan, if all payments have been made, any outstanding debts are typically discharged, allowing the individual to start anew with their finances.

Examples of Chapter 13 Bankruptcy

  1. Susan had fallen behind on her mortgage payments and was at risk of losing her home to foreclosure. With the help of a bankruptcy attorney, she filed for Chapter 13 bankruptcy and was able to negotiate a repayment plan that allowed her to keep her home and pay off her debts over a period of five years.

  2. John had amassed thousands of dollars in credit card debt and was struggling to make minimum payments each month. He filed for Chapter 13 bankruptcy and was able to consolidate his debts into one monthly payment that was much more manageable.

  3. After losing her job, Mary was unable to keep up with her car payments and was facing repossession. With the help of a bankruptcy attorney, she filed for Chapter 13 bankruptcy and was able to renegotiate her car loan, allowing her to keep her car and pay back her outstanding debts over a period of three years.

Legal Terms Similar to Chapter 13 Bankruptcy

  • Chapter 7 bankruptcy: A type of bankruptcy that involves liquidating one's assets to repay outstanding debts.

  • Debtor: A person who owes money to another person or entity.

  • Creditor: A person or entity to whom money is owed.

  • Bankruptcy trustee: A court-appointed individual responsible for overseeing the administration of a bankruptcy case.