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For many individuals, Chapter 7 bankruptcy is not an option. This may be the case for those that have an above average income or a large number of secured debts. While eligibility for both Chapter 7 and Chapter 13 bankruptcies weigh heavily on an individual’s income, only a Chapter 13 allows individuals with steady incomes to restructure and repay a portion of their debt.

The Chapter 13 bankruptcy plan is also known as the wage earners plan because it allows debtors the chance to negotiate a repayment plan based on their expendable income. The portion of their income that is used to calculate their repayment amount is based on the amount of their income that is left after all their necessities are covered. Not only does this give debtors the chance to make good on some of their debts, but it also gives them a structured budget to live by.

This type of bankruptcy is useful for those individuals that wish to hold on to their home. Even if a debtor’s personal residence is in the midst of foreclosure, Chapter 13 bankruptcy may allow them to get caught up on mortgage payments and maintain ownership of their home.After filing a Chapter 13 wage earners bankruptcy, a bankruptcy trustee takes over as a liaison between the debtor and their creditors. During the time of repayment, usually 3 to 5 years, the bankruptcy trustee collects the debtor’s payments and distributes them among creditors.

During the repayment period of a Chapter 13 bankruptcy, unsecured debts do not get paid in full. The idea behind a restructured repayment is to allow the creditor to receive as much in repayment as they would if a debtor’s assets were liquidated and dispersed.

A Chapter 13 bankruptcy may be the best option for individuals with a steady income over the median income for their state. However, there are many confusing and highly complex aspects of filing bankruptcy that may be best addressed by working with an experienced attorney.