Chapter 13 bankruptcy, often referred to as the "wage earner plan," is designed for individuals with a regular income who want to repay all or part of their debts over time. This type of bankruptcy allows debtors to keep their property while making payments to creditors according to a court-approved plan, typically lasting three to five years. It is particularly beneficial for those who have a steady income but need assistance managing their debts, as it provides a structured way to repay obligations without the immediate liquidation of assets, which is a hallmark of Chapter 7 bankruptcy.
In contrast, Chapter 7 involves liquidation of assets to pay off debts and is generally utilized by individuals with limited income and few assets. Chapter 11 is primarily aimed at businesses and allows for reorganization while enabling them to keep operating. Chapter 12 is specifically designed for family farmers and fishermen, providing a framework for restructuring debts. Thus, Chapter 13 sets itself apart by focusing on individuals with stable incomes who aim to regain control of their financial situation through a manageable repayment plan.