Chapter 13

AAA

DEFINITION of 'Chapter 13'

A U.S. bankruptcy proceeding in which the debtor undertakes a reorganization of his or her finances under the supervision and approval of the courts. As part of the reorganization, the debtor must submit and follow through with a plan to repay outstanding creditors within three to five years. In most circumstances, the repayment plan must provide a substantial payback to creditors - at least equal to what they would receive under other forms of bankruptcy - and it must, if needed, use 100% of the debtor's income for repayment.

INVESTOPEDIA EXPLAINS 'Chapter 13'

Chapter 13 bankruptcy differs from the outright foreclosure of an individual's or business's assets (seen in Chapter 7 bankruptcy) and the expensive and complicated restructuring of debts seen in Chapter 11 bankruptcy. Essentially, Chapter 13 allows a debt-laden person or sole proprietorship that still has significant income to submit an orderly plan to the courts to pay back debts over a few years. Doing so can provide advantages to the debtor not found in other forms of bankruptcy, such as preventing the foreclosure of a residence.

RELATED TERMS
  1. Foreclosure - FCL

    A situation in which a homeowner is unable to make principal ...
  2. Wage Earner Plan (Chapter 13 Bankruptcy)

    Also known as a Chapter 13 bankruptcy, this enables individuals ...
  3. Chapter 7

    A bankruptcy proceeding in which a company stops all operations ...
  4. Technical Bankruptcy

    The state of a company or person who has defaulted on a financial ...
  5. Prepackaged Bankruptcy

    A plan for financial reorganization that a company prepares in ...
  6. Solvency

    The ability of a company to meet its long-term financial obligations. ...
Related Articles
  1. What happens to a company's stocks and ...
    Investing

    What happens to a company's stocks and ...

  2. Bankruptcy Protection For Your Accounts
    Retirement

    Bankruptcy Protection For Your Accounts

  3. How To Survive A Bankruptcy Filing
    Credit & Loans

    How To Survive A Bankruptcy Filing

  4. Bankruptcy Filing Changes That Could ...
    Options & Futures

    Bankruptcy Filing Changes That Could ...

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center