Chapter Thirteen (13) is known as the “wage earner’s bankruptcy.” This involves the debtor’s making payments to the Bankruptcy Trustee’s office for a period of five (5) years to pay a portion of his debts. Under this Chapter, a debtor has to develop and file a plan for payments to creditors based on his income. Debtors in this Chapter must have the ability to pay debts that they are behind on over a period of time. A debtor generally gets to keep his non-exempted assets. This Chapter is normally used for debtors who are behind on their homes or other assets they want to keep.
When filing this Chapter, a debtor must propose an amount to pay each creditor. The Trustee office will collect the payments from either the debtor’s employment or the debtor himself, depending on if the debtor has a job. The amount of payment is based on the amount of debt, the monthly financial obligation and how much can be paid to the unsecured creditors. The remainder of the debtor’s income is used to pay all personal or business expenses such as utility bills, personal grocery bills, gas for vehicles and other miscellaneous expenses for daily living.
As to a personal home, the amount of payment cannot be changed. If a debtor is behind in payment, he can take the past due amount, called arrearage, and pay it over a five (5) year period. The mortgage payment must also be made during this same time. If a debtor has a rental property, he may keep this; however, he must pay the arrearage and monthly obligations.