Chapter 13 Wage Earner Plan

In the United States, one of the leading alternatives to a Chapter 7 Bankruptcy is a Chapter 13 Wage Earner Plan. In Canada, Canadians can file a consumer proposal, which is similar to a Wage Earner Plan.

A Chapter 13 plan is exactly what its name implies: a plan to repay your debts. In a typical Wage Earner Plan, you make monthly payments for a period of up to five years, and at the conclusion of the plan your remaining debts are eliminated.

In a Chapter 7 bankruptcy, the bankrupt is required to surrender all of their non-exempt property, which means they may lose their house or car as a result of going bankrupt. In a Chapter 13 Plan, generally all that is required is that you make all of your payments; you typically are not required to surrender any of your assets.

To start the process, you are required first to attend a credit counselling session. Upon the completion of the session you may file a petition with the bankruptcy court in your home district. You must file with the petition schedules of assets and liabilities, current income and expenditures, executory contracts and unexpired leases. A schedule of exempt assets is also filed.

Since this is a complex process, it is strongly recommended that you have the assistance of a bankruptcy attorney when you file the petition.

Once the Wage Earner Plan is filed, most legal actions are "stayed", which means the creditors cannot start or continue any lawsuits, or take any further action against you. The creditors can then accept or reject your plan. If accepted, it is then approved by the court.

Filings under Chapter 13 have increased substantially since October, 2005 when new bankruptcy rules became law. Previously, most debtors could file a straight bankruptcy under Chapter 7 to discharge their debts. Now, if your income is significantly above the average income in your area, as determined by a Means Test, you are required to file under Chapter 13.

Determining whether or not you are eligible to file under Chapter 7 or Chapter 13 Wage Earner Plan is complicated, so the assistance of a bankruptcy attorney is strongly recommended.

Link to MoneyProblems.ca | Complete Advisor List