CHAPTER 13 BANKRUPTCY
Let’s assume in the above example the debtor owns some assets with actual value, for example jewelry, paintings, ornaments, collections, paid off cars and or cash. However, while there is value in some of these assets, they are still insufficient to pay off all of the debts. In this scenario, the debtor is a candidate for a chapter 13. Since there are assets with value, but not enough value to satisfy the creditors in full, the debtor likely will not qualify for a chapter 7 and thus can turn to a chapter 13. Chapter 13 is effectively a repayment plan but the payments are calculated based on the worth of the assets. So while the creditors will receive payment, they will not receive full payment. For example, a debtor has assets worth $100,000.00, they cannot qualify for a chapter 7 because their assets exceed the threshold cap on assets to qualify for a chapter 7, but simultaneously they owe $200,000.00, here the debtor may apply for a repayment plan which will need to be approved by a bankruptcy judge and trustee.While the creditors in this example will not be made whole and may even receive 50c on the dollar, this is an example of a case that qualifies for a chapter 13. Think of a chapter 13 as a grand all-encompassing consolidation plan. All creditors secured and unsecured are pooled together and the debtor makes one single payment monthly which satisfies all the creditors, even though the creditors are receiving less than what they are officially owned.