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Chapter 13, Adjustment of Debts of an
Individual With Regular Income, is designed for an debtor
who has a regular source of income. Chapter 13 is often
preferable to chapter 7 because it enables the debtor to
keep a valuable asset, such as a house, and because it
allows the debtor to propose a “plan” to repay creditors
over time – usually three to five years. Chapter 13 is also
used by consumer debtors who do not qualify for chapter 7
relief under the means test. At a confirmation hearing, the
court either approves or disapproves the debtor’s repayment
plan, depending on whether it meets the Bankruptcy Code’s
requirements for confirmation. Chapter 13 is very different
from chapter 7 since the chapter 13 debtor usually remains
in possession of the property of the estate and makes
payments to creditors, through the trustee, based on the
debtor’s anticipated income over the life of the plan.
Unlike chapter 7, the debtor does not receive an immediate
discharge of debts. The debtor must complete the payments
required under the plan before the discharge is received.
The debtor is protected from lawsuits, garnishments, and
other creditor actions while the plan is in effect. The
discharge is also somewhat broader (i.e., more debts
are eliminated) under chapter 13 than the discharge under
chapter 7 court-approved plan of reorganization.*
*From “Bankruptcy
Basics from the Administrative Office of the United States
Courts.”
HOUSTON BANKRUPTCY ATTORNEY
CHAPTER 7, 13 LAWYER
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