United States Bankruptcy laws are designed to provide relief to individuals and businesses that are experiencing extreme financial difficulties. Information on Chapters 7
of the Bankruptcy Code is also available.
Chapter 13 is commonly referred to as the wage earner plan. If a debtor (or husband and wife debtors) has any sort of income, from any source, he can file a petition for relief under Chapter 13 and repay his creditors, in part or in full, through a Chapter 13 trustee. Within 2 weeks of filing bankruptcy, the debtor must file a plan for repaying all or a part of his debt to creditors. The creditors can accept or reject the plan, but the final decision as to approval of the plan is up to the Bankruptcy judge.
Within a month of filing bankruptcy, the debtor must make monthly payments to his Chapter 13 trustee. Once a plan of repayment is approved by the judge, the trustee pays this money to the creditors according to the repayment plan. These payments to the trustee normally continue for three to five years. A Chapter 13 filing may allow the debtor to stop foreclosure by bringing all past due payments and penalties current by making payments to the trustee according to the Chapter 13 plan. Most mortgage payments must then continue to the mortgage company or bank.
If the debtor follows the repayment plan by making all payments called for by the Plan, the debtor receives a discharge order by which the bankruptcy judge formally forgives or discharges the debtor of all debts that can be discharged. Debts which may not be discharged are alimony, support, recent taxes, student loans or debts obtained by fraud and some others. A discharge does not ordinarily affect mortgages, car loans or most other liens.
Filing for bankruptcy relief damages credit ratings; it can be reported by credit bureaus for ten years. Although credit may be difficult to obtain after bankruptcy, there is no law prohibiting a person who files bankruptcy from obtaining credit. Some creditors are more likely to give credit to those individuals who file under Chapter 13 than Chapter 7. While individuals can represent themselves, bankruptcy can be complicated. There are exceptions to much of what is set forth here. Anyone considering bankruptcy is urged to consult and employ a lawyer.
This information was prepared to give you some general information on the law. It is not intended as legal advice about any particular problem. If you have questions about the law you should consult a lawyer. If you do not know a lawyer, you can call the South Carolina Bar Lawyer Referral Service weekdays between 9 a.m. and 5 p.m. The number is 799-7100 in Richland or Lexington Counties, and 1-800-868-2284 from other parts of the state.