Chapter 13 Bankruptcy Protection

Chapter 13 bankruptcy, otherwise termed as the wage earner's plan, or reorganization bankruptcy, is a process wherein the debtor submits to the bankruptcy court a request for reorganization of the debts with the payment period extended. The financial difficulty faced by the debtor makes it impossible for him to balance the debt payment with his income earning. To gain bankruptcy protection under Chapter 13 the debtor has to follow some basic measures that are inevitable to shield him from foreclosure and garnishment. The prerequisite for seeking relief under Chapter 13 is to prove that the debtor enjoys continuous flow of regular income that can be employed for the payment to the creditors, which exceed his essential expenses.

As a preliminary measure the debtor has to undergo mandated credit counseling from an agency approved by the United States Trustee's office before filing a petition for Chapter 13 bankruptcy before the Court. The fees charged by these agencies may vary with the financial dilemma of the debtor. These agencies typically charge a fee of $50-$100 per debtor. On the completion of the counseling session, the debtor needs to present proof and statement of his income and expenses and the amount due to the various creditors. It is also mandatory to provide with the bankruptcy court a copy of signed federal tax return for the previous year and evidence of federal and state tax returns for the previous four years.

After getting ready the required documents, the debtor looking for Chapter 13 bankruptcy protection has to put forth his proposed plan of repayment based on the income and expenses. The Court, after the submission of the requisite fee, will thoroughly evaluate these documents, and if satisfied, will appoint a trustee to look into the distribution of the revenue received every month from the debtor until the completion of the stipulated time frame.

But, always be wary of the fact that failure to heed to these basic requirements might result in the conversion of Chapter 13 to Chapter 7 bankruptcy.