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 11

    Named after the U.S. bankruptcy code 11, Chapter 11 is a form ...
  3. Chapter 13

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

    A legal proceeding involving a person or business that is unable ...
  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 FAQS
  1. What are the pros and cons of operating on a balanced-budget?

    Few issues are more complicated, contentious and controversial in contemporary American politics than balancing the federal ... Read Full Answer >>
  2. How can you use a cash flow statement to make a budget?

    To use the cash flow statement to make a budget, a company needs to combine the operating cash flow portion of its cash flow ... Read Full Answer >>
  3. What do mortgage lenders use the securitization food chain?

    The phrase "securitization food chain" was made popular by director Chris Ferguson in "Inside Job," a film about the 2007-2 ... Read Full Answer >>
  4. What's the difference between budgeting and financial forecasting?

    Budgeting and financial forecasting are financial planning techniques that help business personnel in the decision-making ... Read Full Answer >>
  5. Do mortgage escrow accounts earn interest?

    A bank is not required to pay interest on any escrow accounts (also mortgage impound accounts) it holds for its customers. ... Read Full Answer >>
  6. What role did securitization play in the U.S. subprime mortgage crisis?

    The securitization of subprime mortgages into mortgage-backed securities (MBS) and collateralized debt obligations (CDOs) ... Read Full Answer >>
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. Credit & Loans

    Is it Worth Saving Up for a Bigger Down Payment?

    There are numerous low-down-payment mortgage options out there, but sometimes it makes sense to build up your savings so you can borrow less.
  8. Credit & Loans

    Is A 30-Year Mortgage Really Best?

    It's the most popular choice, but home buyers with 30-year mortgages may be paying more to finance their home than they need to.
  9. Credit & Loans

    What Are The Pros and Cons Of A 15-Year Mortgage?

    The shorter term, and higher monthly payment, are only part of the picture.
  10. Credit & Loans

    Which Is Better: A 30-Year Or 15-Year Mortgage?

    The difference in monthly payments is what homebuyers think of first when they compare the two. But have you considered these other points?

You May Also Like

Hot Definitions
  1. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  2. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  3. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  4. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  5. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
Trading Center