Full Video Transcript
A Chapter 13 bankruptcy allows people with regular incomes to develop a repayment plan to repay all or part of their debts. This is why a Chapter 13 bankruptcy is also known as a "wage earner's bankruptcy." A primary benefit of a Chapter 13 bankruptcy is that it allows individuals to stop foreclosure proceedings against their homes and may allow a person the ability to pay off delinquent mortgage payments over time. After an individual files for a Chapter 13 bankruptcy, a meeting is scheduled and later attended by the debtor, all creditors, and a third party trustee or administrator. During this meeting, the different parties discuss the debtor's financial situation and his or her ability to pay off debts. A repayment plan is usually crafted during this meeting or shortly thereafter. A Chapter 13 repayment plan provides for a portion of future income to be paid to a trustee, who in turn makes payments on all or part of the debts over a longer period of time. The period is usually three years, but it can't be more than five.