What is the primary feature of Chapter 13 bankruptcy?

What is the primary feature of Chapter 13 bankruptcy?

• A. Allows for a total liquidation of assets
• B. Allows a natural person to reorganize and pay debts over time
• C. Permits companies to restructure without paying debts
• D. Offers immediate federal aid to debtors

Answer: (B)

The primary feature of Chapter 13 bankruptcy is that it allows a natural person to reorganize and pay debts over time. This type of bankruptcy is designed for individuals with regular income who want to repay their debts according to a court-approved repayment plan instead of facing immediate liquidation of their assets. Under Chapter 13, individuals can keep their property and work on settling their debts over a period of three to five years, thus providing an opportunity to regain financial stability while managing their obligations. This feature contrasts significantly with total liquidation, which is more characteristic of Chapter 7 bankruptcy, where assets are sold off to pay creditors. Additionally, while corporate restructuring is associated with Chapter 11 bankruptcy, Chapter 13 specifically targets individual debtors. The option that suggests federal aid does not apply, as Chapter 13 does not provide direct financial assistance but rather a structured plan for debt repayment.

The primary feature of Chapter 13 bankruptcy is that it allows a natural person to reorganize and pay debts over time. This type of bankruptcy is designed for individuals with regular income who want to repay their debts according to a court-approved repayment plan instead of facing immediate liquidation of their assets. Under Chapter 13, individuals can keep their property and work on settling their debts over a period of three to five years, thus providing an opportunity to regain financial stability while managing their obligations.

This feature contrasts significantly with total liquidation, which is more characteristic of Chapter 7 bankruptcy, where assets are sold off to pay creditors. Additionally, while corporate restructuring is associated with Chapter 11 bankruptcy, Chapter 13 specifically targets individual debtors. The option that suggests federal aid does not apply, as Chapter 13 does not provide direct financial assistance but rather a structured plan for debt repayment.