Wage Earner Plan (Chapter 13 Bankruptcy)

AAA

DEFINITION of 'Wage Earner Plan (Chapter 13 Bankruptcy)'

Also known as a Chapter 13 bankruptcy, this enables individuals with regular income to develop a plan to repay all or part of their debts for a period of three to five years. The repayment period depends on the debtor's monthly income as compared to the applicable state median. During this repayment period, the law forbids creditors from starting or continuing collection efforts.


Chapter 13 was formerly called a wage earner's plan because relief under it was only available to individuals who earned a regular wage. Subsequent statute changes expanded it to include any individual, including the self-employed and those operating an unincorporated business.




INVESTOPEDIA EXPLAINS 'Wage Earner Plan (Chapter 13 Bankruptcy)'

A Chapter 13 bankruptcy offers individuals a number of advantages over Chapter 7, the most important being that it offers them an opportunity to save their homes from foreclosure. Chapter 13 also allows individuals to reschedule secured debts - except for a mortgage on their primary residence - and extend them over the life of the plan, which may lower their payments. In addition, Chapter 13 has a special provision that may protect co-signers, and also acts like a consolidation plan under which plan payments are made to a trustee who distributes them to creditors.


Any individual is eligible for Chapter 13 relief as long as his or her unsecured debts are less than $360,475, and secured debts are less than $1,081,400 (as of 2010), and he or she has received credit counseling within 180 days before filing. A corporation or partnership is not eligible for Chapter 13 bankruptcy.




RELATED TERMS
  1. Means Test

    A method for determining whether someone qualifies for a financial-assistance ...
  2. Chapter 13

    A U.S. bankruptcy proceeding in which the debtor undertakes a ...
  3. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  4. Chapter 11

    Named after the U.S. bankruptcy code 11, Chapter 11 is a form ...
  5. Chapter 7

    A bankruptcy proceeding in which a company stops all operations ...
  6. Total Annual Loan Cost (TALC)

    The projected total cost that a reverse mortgage holder should ...
Related Articles
  1. Budgeting

    Debt Consolidation Made Easy

    These five steps can help get you out of debt faster and easier than you'd ever imagined.
  2. Retirement

    Boomer Bankruptcy Strains Retirement

    Having to file for bankruptcy adds risk and steals the luster from your golden years.
  3. Insurance

    Declaring Bankruptcy Is No Easy Out

    Going bankrupt can help pull you out of debt, but it's rarely the best option.
  4. Insurance

    Life After Bankruptcy

    Find out what you have to look forward to after filing for Chapter 7 or 13.
  5. Options & Futures

    Saving Your Home From Foreclosure

    Learn the tactics you can use to prevent your home from being repossessed.
  6. Options & Futures

    Changing The Face Of Bankruptcy

    A 2005 law attempts to unmask fraudulent debtors and still save those who are struggling. Will it affect you?
  7. Retirement

    Know The Cost of Living Where You Plan To Retire

    When considering where to live after retiring, it's important to keep in mind the type of taxes that would have to be paid at each retirement location.
  8. Home & Auto

    Where are home values falling the fastest in the US, and why?

    Learn about the metropolitan areas in the United States experiencing the largest drops in median single family homes values in 2014 and the reasons behind it.
  9. FHA mortgages offer flexibility and low down payments, though they're often pricier than traditional loans backed by private mortgage insurance.
    Credit & Loans

    Before You Choose An FHA Mortgage: 7 Key Points

    FHA mortgages offer flexibility and low down payments, though they're often pricier than traditional loans backed by private mortgage insurance.
  10. Home & Auto

    How did the ABX index behave during the 2008 subprime mortgage crisis?

    Read about the disastrous performance of the various ABX indexes in the subprime mortgage crisis of 2008 during the middle of the Great Recession.

You May Also Like

Hot Definitions
  1. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  2. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  3. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  4. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  5. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  6. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
Trading Center