Chapter 13

Bankruptcy laws and petitions in the United States Code (USC) are covered under Title 11. Chapter 13 is a form of bankruptcy provided by Title 11. It involves debt readjustment through a court approved plan for reorganization. Under Chapter 13, the reorganization plan must be agreed upon by the creditors, once it is approved by the court. On the contrary, debt readjustment under Chapter 11 seeks approval of creditors on the reorganization plan. This may/may not be agreed upon by the creditors and another plan may be drafted.

Chapter 13 Plan

The rehabilitation plan proposed by debtors after filing for bankruptcy under Chapter 13 of the Federal Court is called the Chapter 13 plan. The aim of this plan is to achieve debt readjustment by settling the claims made by creditors. Once the court approves the plan, it must be agreed upon by creditors. Sometimes an organization may be faced with a situation where they do not have the disposable income required to support the reorganization plan. In such scenarios, they are not eligible for Chapter 13 bankruptcy.

Debt readjustment under Chapter 13 Plan must be carried out over a period of 3-5 years. Chapter 13 bankruptcy is the first choice for numerous bankrupt corporations and individuals. However, it comes with some positives and negatives.

Benefits Of Chapter 13

Drawbacks Of Chapter 13

Chapter 13 bankruptcy should be filed after duly evaluating all the pros and cons. Though a popular form of bankruptcy law, it involves various secondary procedures that need to be kept in mind. It is the second most commonly filed bankruptcy petition after Chapter 7.