How Does Chapter 13 Bankruptcy Work?

How Does Chapter 13 Bankruptcy Work?

January 29, 2024 by investor

How Does Chapter 13 Bankruptcy Work?

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

Chapter 13  bankruptcy reorganizes the debt and sets up a payment plan.

The debtor can keep their house as long as they make the payments.

The debtor has 3-5 years to pay off the debt in most cases.

To use Chapter 13, the debtor must submit a reorganization plan which asks for debt forgiveness for some debts and a repayment plan for the creditors.

Some debts are not dischargeable in any event such as child support payments, student loans, alimony payments, and taxes.

To use Chapter 13, you must be current with your taxes, have a steady income, and have debt below prescribed thresholds.

Chapter 13 puts a Stay on debt collections while the reorganization plan is developed.

To file Chapter 13, the debtor must show a list of creditors and what is owed monthly living expenses, and proof of income.

This type of bankruptcy is meant for individuals and not businesses. 

It is used to avoid liquidating personal assets such as a house.


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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.