Chapter 13 - Reorganization

Chapter 13 is commonly referred to as a reorganization. This chapter is available for business and individuals who have a regular source of income. Through their regular source of income, a debtor can provide for repayments to both secured and unsecured lenders for 3-5 years.

This chapter provides an opportunity for the debtor (term used for individual who files for bankruptcy), to pay back some, if not all, of their debt to their secured and unsecured lenders. Further, this chapter is primarily used by debtors who wish to avoid a foreclosure on a home or repossession of their vehicle.

In addition to preparing a bankruptcy petition, the debtor will also have to provide a plan of reorganization. Under this plan of reorganization, the debtor will provide payments to the chapter 13 trustee over the course of the plan. This plan is determined by first determining the debtor's yearly income. Depending on that income, the plan of reorganization will be either 3 or 5 years.

Thereafter, under the plan and under the 707 means test, debtor's personal expenses are deducted as well as those allowed under the Bankrutcy Code. The remaining income is then used to provide for payments to both secured and unsecured lenders.

Based on those figures, the debtor will help pay back some if not all of their debts over time thereby providing them with protection through the bankruptcy court.

Once the plan is completed, any remaining unsecured debt, so long as it is not specifically excluded by the Bankruptcy Code, will be discharged (meaning the debtor will no longer owe the remaining amount).

This discharge, which is available under chapter 7 and 13, provides the ultimately relief for debtors and is one of the main reasons individuals file for chapter 7 or 13 bankruptcy.

For further information and to determine your eligibility, please contact us at Omid@LoomLegal.com or directly at (310) 594 - 7646.