For consumer Bankruptcy ( as opposed to business Bankruptcy Chapter 11 ) there are basically 2 Chapters of the Bankruptcy code available, Chapter 7 and Chapter 13.
A Chapter 13 bankruptcy is basically for consumers that do have non
exempt assets such as a house and or expensive vehicles and they desire
to keep those assets. Unlike a Chapter 7 Bankruptcy which as mentioned
is a complete discharge of all dischargeable debt, a Chapter 13
Bankruptcy is one in which the debtor makes monthly payments to the
Bankruptcy trustee , usually over a 5 year period according to a plan
agreed upon by the Trustee, creditors and the debtor. The amount of the
payments is determined by how much assets and how much debt the debtor
has and the ability of the debtor to make the monthly payments.
The
percentage of debt that is paid back by the debtor to the trustee ( for
the benefit of the creditors ) is determined by the factors mentioned in
determining the amount of the payments. Some Chapter 13 cases may be
“full payback” meaning the creditors will get paid back all they are
owed but it will be spread out over a 5 year plan.If the debtor does not
have enough assets to pay back in full, a lesser percentage is
determined.
For example if debtor has enough assets to pay back one half
of what is owed this means each creditor will receive one half of what
is owed ( this would be known as a 50% plan ). As mentioned, the plan
has to be agreed upon ( trustee confirms the plan after a hearing ).
Additionally the plan has to be feasible ( workable ), meaning the
debtor must have the ability to make the payments during the life of the
plan, or the trustee will not confirm the plan. If the plan is
confirmed but the debtor is unable to make all of the payments during
the plan, the bankruptcy will be dismissed and the debts will not be
discharged.
