Chapter 13, entitled Adjustment of Debts of an Individual With Regular Income, is designed for an individual debtor who has a regular source of income. Chapter 13 is often preferable to chapter 7 because it enables the debtor to keep a valuable asset, such as a house, and because it allows the debtor to propose a "plan" to repay creditors over time - usually three to five years. Chapter 13 is also used by consumer debtors who do not qualify for chapter 7 relief under the means test.
At a confirmation hearing, the court either approves or disapproves the debtor's repayment plan, depending on whether it meets the Bankruptcy Code's requirements for confirmation. Chapter 13 is very different from chapter 7 since the chapter 13 debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtor's anticipated income over the life of the plan. Unlike chapter 7, the debtor does not receive an immediate discharge of debts.
The debtor must complete the payments required under the plan before the discharge is received. The debtor is protected from lawsuits, garnishments, and other creditor actions while the plan is in effect. The discharge is also somewhat broader (i.e., more debts are eliminated) under chapter 13 than the discharge under chapter 7.
In addition to the basic types of bankruptcy cases, Bankruptcy Basics provides an overview of the Servicemembers' Civil Relief Act, which, among other things, provides protection to members of the military against the entry of default judgments and gives the court the ability to stay proceedings against military debtors.
This publication also contains a description of liquidation proceedings under the Securities Investor Protection Act ("SIPA"). Although the Bankruptcy Code provides for a stockbroker liquidation proceeding, it is far more likely that a failing brokerage firm will find itself involved in a SIPA proceeding. The purpose of SIPA is to return to investors securities and cash left with failed brokerages. Since being established by Congress in 1970, the Securities Investor Protection Corporation has protected investors who deposit stocks and bonds with brokerage firms by ensuring that every customer's property is protected, up to $500,000 per customer.
The bankruptcy process is complex and relies on legal concepts like the "automatic stay," "discharge," "exemptions", and "assume". Therefore, the final chapter of this publication is a glossary of Bankruptcy Terminology which explains, in layman's terms, most of the legal concepts that apply in cases filed under the Bankruptcy Code.
For more information such as above, please visit: http://www.uscourts.gov/bankruptcycourts/bankruptcybasics.html