Top Facts You Need to Know About Chapter 13 Bankruptcy

the front of a chapter 13 bankruptcy filing form


By:Mike Cibik


Liquidation is one of the biggest fears of individuals who are facing overwhelming debts. Chapter 7 bankruptcy is achieved through total liquidation of an individual’s assets. Instead of facing liquidation, many debtors decide to set up a repayment plan that reduces their payments into something that fits their debt to income ratio. This is Chapter 13, and is not the end of the road; an individual will not be thrown out on the street to fend for themselves. To understand bankruptcy in a clearer manner, learning more about the bankruptcy chapter definitions will be helpful.


The first big question to answer is how many times you can file Chapter 13 bankruptcy. A debtor may file two or three times, even after discharge. This type of bankruptcy is not focused on the elimination of debt but instead focuses on the reorganization of an individual’s finances. Chapter 13 requires the debtor to make monthly payments to a Chapter 13 trustee for 3-5 years.


This money will be then dispersed to the creditors that are owed money and have filed proper claims. This process leads to a discharge of debt. Understanding the different bankruptcy chapter definitions will help a debtor decide which Chapter will be more beneficial to their situation; consulting with a bankruptcy attorney should be the first step for any person considering bankruptcy as their only financial option.


How is Debt Discharged Under Chapter 13?

  • The debtor has bankruptcy protection even if he makes too much money. 
  • The debtor is given a plan that allows backed-payments to be paid on their property (including houses, cars, and other loans with collateral) 
  • The debtor has an opportunity to pay past due income taxes and domestic support obligations (child support and alimony) 
  • The debtor may set new terms for car loans that are older than 2.5 years. 
  • Chapter 13 protects the debtor’s co-signers from having to pay. 
  • Chapter 13 allows the debtor to manage insurmountable student loan payments appropriately. 
  • Chapter 13 protects the debtor’s property that he or she would have to give up under a Chapter 7 bankruptcy. 
  • Chapter 13 may allow the debtor to pay his bankruptcy attorney fees as a part of the payment plan established under the filing. 


Understanding Chapter 13 Bankruptcy

Outside of the differences in the bankruptcy chapter definitions between Chapter 7 and Chapter 13, three facts are most important to the debtor when filing.


First, Chapter 13 focuses primarily on the individual debtor instead of the creditors. Most times, the debtor has no leverage when a collection agency calls and demands a payment plan. This type of bankruptcy puts the power back into the debtor’s hands. When understanding bankruptcy and the advantages it can offer to the debtor investigate filing for bankruptcy. Under Chapter 13, the payment program will be set up to suit the income of the debtor so it is manageable.


Second, Chapter 13 protects the debtor from foreclosure. If your house is at risk of foreclosure, you may want to file a Chapter 13 to prevent creditors from taking your home. An “automatic stay” will be set up as protection to stop foreclosure proceedings with a repayment plan to stop the seizure of your property.


Third, Chapter 13 offers the opportunity to lower payments and eliminate debt. Under this new payment plan, you may be relieved of payments to certain debts that are not attached to any form of collateral. For example, if the payments reach a point that the creditors would have achieved under a Chapter 7 liquidation, then at the expiration of the repayment plan, the debt will be considered paid in full and will be relieved against the debtor.



Many debtors can take advantage a Chapter 13 bankruptcy by allowing the debts to be settled with the debtor’s financial restrictions being taken into consideration. If in need, discuss with a professional at Cibik & Cataldo to assist you in bankruptcy needs. To learn more about Chapter 13 or bankruptcy in general, contact Cibik & Cataldo by filling out our form or by calling at 215-735-1060.


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