Chapter 13 debt reorganization is a voluntary reorganization of debt available to individuals. Chapter 13 was established by Congress pursuant to Title 11 of the United States Code. To qualify for Chapter 13 debt reorganization, a person must have a steady source of income in which to make monthly payments to the Chapter 13 Trustee. Chapter 13 allows an individual to reorganize their debt by devoting a minimum of three years, and a maximum of five years, of monthly disposable income in the repayment of their debts. The goal of Chapter 13 is to provide the individual with a fresh financial start but also to maximize the payment to creditors.

The monthly disposable income that an individual devotes to Chapter 13 payments is based on a monthly budget proposed by the individual when filing for a Chapter 13 bankruptcy. Chapter 13 reorganization includes monthly income and expense budgets. If the individual does not have income remaining in which to make a Chapter 13 payment after paying necessary and ordinary expenses, the individual may not qualify for Chapter 13. Ordinary and necessary expenses does not necessarily mean the individuals current expenses. An individual undertaking a Chapter 13 bankruptcy is required to devise a budget which is reasonable, but not excessive. An individual undertaking a Chapter 13 bankruptcy reorganization should consult an attorney to determine their eligibility for Chapter 13 and to review monthly expenses and income in proposing a monthly payment to the Chapter 13 Trustee.

If the individual's case is confirmed by the United States Bankruptcy Court, the individual undertaking the reorganization is required to make payments to the Chapter 13 Trustee monthly. Said payments will be distributed to the individuals creditors pursuant to the Court approved plan of debt reorganization.

It is in the individual's best interest to retain an attorney to file a Chapter 13 bankruptcy reorganization. Chapter 13 reorganizations are complex and can involve many legal issues.

In recent years, there have been a number of non-attorney firms advertising as "Bankruptcy Petition Preparers". Bankruptcy petition preparers are not attorneys and cannot represent individuals before the United States Bankruptcy Court. Please click on the link for bankruptcy petition preparers for further information.

A Chapter 13 bankruptcy is different than a Chapter 7 bankruptcy. In a Chapter 7 bankruptcy, individuals must surrender the majority of their property except for a few assets which can be claimed exempt. In a Chapter 13 bankruptcy, the individual has an opportunity to retain their assets provided that the net equity in said assets are paid to creditors. One of the major differences between a Chapter 7 and a Chapter 13 is that individuals who own a home and have built up equity, will seek to do a Chapter 13 in an effort to catch up on mortgage arrearage instead of losing the house in a Chapter 7 bankruptcy liquidation.

This web page was developed to provide educational information on the Chapter 13 process and includes frequently asked questions, a version of the Chapter 13 Akron, Ohio, handbook which can be downloaded, a section on the perils of using a bankruptcy petition preparer, and an overview of the entire Chapter 13 process. This information is not meant to convey legal advice to an individual seeking Chapter 13 bankruptcy reorganization, but is meant strictly as an educational tool for individuals who find themselves in financial hardship and are in the process of reviewing their financial options.