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Chapter 13

Chapter 13, otherwise known as a "repayment plan" allows individuals and small businesses to eliminate some or all of the unsecured debt.  Because Chapter 7 has a "means test" some people will not qualify to file Chapter 7 and must file a Chapter 13 instead. 

Just as with Chapter 7, you are allowed to keep your "exempt" assets, which often include your cars, home, furniture and clothing as well as retirement accounts, college savings funds and other assets.

Chapter 13 involves a payment to the trustee for a period of 3 to 5 years.  These payments can be as low as $100 per month.

Unlike Chapter 7, you may keep your "non-exempt assets" as long as you pay the value of the unexempt asset into the plan.

The process starts by filing a petition with the bankruptcy court which lists all of your assets and debts as well as your income and monthly expenses.

About one month after filing your case you will have a hearing before the trustee assigned to your case.  His or her job is to make sure that you are disclosing all of assets and to make sure that your repayment plan meets the Bankruptcy Code's guidelines.

After your hearing, your plan is "confirmed" by the court.  At this point, the Court has approved your monthly payment and, in most cases, you never have to go to court again.

One you have finished making your payments, you receive your "discharge" otherwise known as your fresh start.

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