Chapter 13, Title 11, United States Code or simply referred to as chapter 13 is a type of bankruptcy that helps in reorganizing the debt. This differs from chapter 7 in that it does not discharge some of the debts which is usually the case with a chapter 7 bankruptcy. Chapter 13 can be voluntary or involuntary and some individuals filing for chapter7 may find themselves forced to opt for chapter 13 if they have the capability to pay off the debt in the coming 3 to 5 years.

• The financial reorganization under chapter 13 is supervised by the bankruptcy court and stays on an individual’s credit report for at least 7 years. In some cases a person cannot file for a chapter 13 bankruptcy if the debt owed doesn’t meet the amount prescribed under chapter 13. There are debt limits that are set in order to determine if a person qualifies for chapter 13. These limits are unsecured debts less than 336,900.00 and secured debts of less than 1,010,650.00 (As of April 2007).
• Some apparent disadvantages of filing for a chapter 13 bankruptcy are – a worsened credit score, the inability of the debtor to apply for additional credit during that period without the bankruptcy court’s permission and the unwillingness of creditors to lend money even after successful completion of the bankruptcy procedure. In short, chapter 13 (or any other bankruptcy) can have an adverse impact on a person’s future financial prospects.
• On the other hand, it cannot be denied that chapter 13 bankruptcy is also advantageous in some ways compared to chapter 7. In chapter 7 the property of the debtor can be foreclosed and sold off which is not the case in chapter 13. The reorganization of debts in chapter 13 implies that the debtor’s personal property is to some extent protected from complete foreclosure for a period of time.
• The Chapter 13 plan is a document that is filed after or together with the chapter 13 petition. This plan has the details regarding the debtor’s liens and secured status of assets and liabilities that are owned or owed associated with the bankruptcy petition. In order for the plan to take effect, there are some requirements to be met including the assurance that the unsecured creditors will have access to at least the equivalent amount if the debtor had been granted a chapter 7 bankruptcy and either not be objected to, pay back all creditors in full, or assign all of the debtor’s disposable earnings to the Chapter 13 plan for no less than three years.
• It is financially prudent to opt for professional advice or take help of an attorney specialized in this field before taking any action. This is because state laws can differ and a small mistake can have long term financial consequences. To avoid unpleasant results and understand the process, the help of an attorney or a professional advisor can be taken even though the costs may seem on the higher side.

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