Chapter 13 bankruptcy law is at times referred to as the wage earners plan. It allows debtors with regular income to pay part, or better still, the full amount of their debt in installments. In this way the debtor is able to retain his property but still pay the full amount of his debts in the course of time. The debtor therefore is allowed to pay the debt owed in amounts that he can afford on a regular basis.
Compared to chapter seven of bankruptcy of liquidating the debtor's property, this chapter is more advantageous. The most obvious advantage being that the individual is able to save his property when faced with insolvency. It is also easy to make plans to pay loans in a period not exceeding five years. It also acts as a loan whereby a trustee is appointed making it easy for the collection of loans and repayment towards the creditors. This way, debts are paid without the debtor coming into contact with the creditors.
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Unlike chapter 7 which allows all types of debtors ranging from partnerships to individuals, chapter 13 of bankruptcy does not deal with cases of partnerships and corporations. Just like in chapter 7, the individual is not eligible for this chapter if the debtor had previously been dismissed from another petition due to failure to turn up in court.
Just like in other chapters on insolvency, the debtor's petition will not be received or worked on if they have not received counseling on financial matters. This counseling is to help the individual in making reasonable decisions concerning credit. This is done whether or not the debtor is in a position to repay the debt.
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