Chapter 13 bankruptcy
A form of personal bankruptcy allowing individuals with regular income to keep assets and repay debts through a 3-5 year court-approved repayment plan.
Example
“Chapter 13 allowed the homeowner to catch up on mortgage arrears over five years while keeping her house.”
Memory Tip
CHAPTER 13 = keep your stuff but follow a repayment plan. For people with income who want to save assets.
Why It Matters
Chapter 13 bankruptcy matters because it offers a middle ground between losing all your assets and being overwhelmed by debt. For people with steady income who want to keep their home or car, this protection allows them to reorganize their finances while maintaining their property and rebuilding their credit over time.
Common Misconception
Many people believe Chapter 13 bankruptcy means they will lose all their possessions and have a permanent mark on their record. In reality, Chapter 13 lets you keep your assets while following a structured repayment plan, and after completion, the impact on your credit score gradually diminishes over the years.
In Practice
A homeowner earning 4,500 dollars per month with 80,000 dollars in debt and a mortgage might file Chapter 13 to avoid foreclosure. The court approves a 5-year repayment plan requiring 1,200 dollars monthly payments to creditors, allowing them to keep their home while addressing their debts in an organized way.
Etymology
Named after Chapter 13 of the US Bankruptcy Code. REPAYMENT PLAN bankruptcy.
Common Misspellings
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See Also
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